Craig Pirrong's Blog, page 79

Alphonse and Gaston Meet LMEshield–and Provide a Cautionary Tale for Blockchain Evangelists

This article isn’t explicitly about blockchain, but in a way it is. It describes the halting progress of the LME’s LMEShield digital warehouse receipt system, and ascribes its problems to the Alphonse-Gaston problem:

“It’s all about liquidity and a tipping point,” said an executive with a warehouse company.

“If Party A is using the system, they can’t trade if Party B is not using the system. It’s a redundant system until market masses are using it.”

After you, Alphonse. No! After you, Gaston! I insist! (Warning! Francophobia and Mexaphobia at the link!)

In essence, LMEshield is attempting to perform one of the same functions as blockchain–providing a secure, digital record of ownership. LMEshield’s technological implementation is not blockchain or distributed ledger, per se. It is a permissioned network operated by a trusted party, and does not employ a distributed ledger, rather than being an unpermissioned network not involving a trusted party, run on a DL.

But it is not that technological difference that is causing the problem: it is the challenge of coordinating the adoption of the use of the system. This coordination problem exists here even though there is an entity–the LME–that has an incentive to promote adoption and build a critical mass so that tipping takes over. Despite a promoter, the virtuous cycle has not taken hold. The adoption problem is even more challenging without a promoter.

This problem will be present in all attempts to create a secure digital record of ownership, regardless of the technology used to achieve this goal.* There is more than one technology to skin this cat, and it is not the technology that will in the end determine whether the cat gets skinned: it is the ability to overcome the coordination problem.**

And as I’ve noted before, if tipping does occur, that just creates another conundrum: tipping effectively creates a natural monopoly (or at best a small numbers natural oligopoly), which raises questions of market power, rent seeking, and governance.

Bitcoin world is providing an illustration of the challenges of governance (as well as raising questions about the scalability of blockchain). Block size has become a big constraint on the capacity to process transactions, leading to a spike in transactions charges and long lags in processing transactions. There are basically two proposals to address this issue: expand the size of blocks, or allow some processing to occur off the blockchain. This has divided Bitcoin world into camps, and raises the possibility that if the dispute is not resolved Bitcoin could experience a hard fork (i.e., split into two or more incompatible networks). Miners (mainly Chinese) want to expand block size: Core (the developers who maintain the software) want to externalize some processing. Both sides are talking their book–go figure–which illustrates that distributive considerations and politicking, rather than efficiency, will have an outsized effect on the outcome.

Keep both LMEshield and the Bitcoin block size debate in mind when somebody offers you pie-in-the-sky, techno-evangalist predictions of how blockchain/DLT Is Going to Change the World. It’s not the technology alone that matters. Indeed, that may be one of the least challenging issues.

Also keep in mind that there is nothing new under the sun. The functions that blockchain/DLT are intended to–or dreamed to–perform are inherent in all transactional settings, including in particular financial and commodity transactions. Blockchain/DLT is a different way of skinning the cat, but the cat has been skinned one way or ‘tother since the dawn of these markets. Maybe in some cases, blockchain/DLT will do it more efficiently. Maybe elements of blockchain/DLT will be blended into more traditional ways of performing these functions. Maybe some applications will prove resistant to blockchain/DLT.

But the crucial thing to keep in mind is that blockchain/DLT will not banish the fundamental challenges of coordinated adoption and governance of a system that scales. And note that if it doesn’t scale, it won’t replace existing systems (which do), and if it does scale, it will pose the same organization, governance, and market power issues that legacy systems do.

*There is no guarantee that DLT is even a technological advance on existing technology. As I discuss further on, some implementations (notably Bitcoin) have exhibited severe problems in scaling. If it don’t scale, it will fail.

**I own a cat. I like my cat. I like cats generally. If colloquialisms offend, this is not the place for you. Particularly colorful if somewhat archaic American colloquialisms that I learned at my grandfather’s knee. Alphonse and Gaston is also something I picked up from my grandfather. Today it would cause an outbreak of fainting, shrieking, and pearl clutching (though maybe not–after all, the characters are Europeans), but if you can’t separate the basic comedic idea from what was acceptable in 1903 (the year of my grandfather’s birth, as well as the date of that clip) but isn’t acceptable today, you’re the one with the issues.

Remember Chinagate?: Trump Jr. Was Betting on Form

The hyperventilating over the Trump Jr.-Veselnitskaya meeting continues. The latest revelation is from a Russian also present at the meeting, lobbyist Rinat Akhmetshin, who claims that Veselnitskaya gave the Trump Jr. party a “plastic folder” (why not a plain brown paper wrapper?) containing “printed documents” (as opposed to what, unprinted documents?) revealing a flow of dirty foreign money into Democratic Party coffers.

According to just about everybody, including the likes of Charles Krauthammer, this is utterly damning. Not only did Trump go to the meeting under the belief he would get damning documents, he actually got them! Proof of collusion!

Did I say hyperventilating earlier? I should have said “paint huffing”: the sound is the same but huffing leads to intoxication and brain damage, which is manifestly evident here. Because it is delusional to think it is somehow scandalous to pursue allegations of foreign money flowing illegally to the DNC during a campaign with someone named “Clinton” at the top of the ticket. It is delusional precisely because allegations that the Clintons and the DNC could be the beneficiaries of illicit foreign donations is hardly beyond the realm of possibility: It is a historical fact. Hello? Remember Chinagate? You know, Johnny Chung. John Huang. James Riady. Maria Hsia. Charlie Trie. Fundraisers in Buddhist temples. The Chinese embassy in Washington coordinating campaign contributions to the DNC–a story broken by the Washington Post, by the way. Veselnitskaya’s claims were not something wildly implausible: they were deja vu. (Which may be precisely why that was her come on.) (And by the way–could you imagine the Category 5 shitstorm that would be raging were there allegations that the Russian embassy in DC had been coordinating donations to the RNC?)

Note that such allegations and the information to substantiate them are not likely to emanate from the Vatican. It is almost inevitable that they would come from a potentially dodgy source with an axe to grind. And the source is ultimately irrelevant as to the truth or falsity of the documents or allegations that the source provides. Reducing all questions of fact to issues of motive-which is true of most of the arguments about Russian influence attempts -is a disreputable tactic, and one that usually means that the facts are pretty damning.

As it happened, Trump Jr. quickly judged that Veselnitskaya could not back up her claims, so he did not pursue the matter.

The nature of Trump Jr.’s supposed sin also sets the head spinning. It is somehow an unpardonable foreign manipulation of US elections to hear out someone claiming to have evidence that one’s opponent is the beneficiary of foreign manipulations? It is foreign interference to receive purported evidence (from foreign sources) about foreign interference?

And that’s somehow worse than accepting–and passing on to law enforcement–unsubstantiated allegations about Trump obtained from a foreign source? John McCain did that with the Steele dossier, which was paid for by (a) at least one of Trump’s Republican opponents, and (b) an as yet unnamed Democratic Party source. Trump Jr. didn’t pay to dig up the alleged dirt: it was brought to him. Trump Jr. rejected what was proffered. McCain (and perhaps others) passed on what they had like the clap.

The Steele dossier was opposition research, meaning that by design it was intended to influence the US election. It was circulated with that intent. It originated from a foreign source, motives unknown. All things which allegedly make the Trump Jr.-Veselnitskaya meeting wrong. Yet the amount of curiosity about the dossier pales in comparison with this Trump Jr. meeting. Do you think Trump Jr. will be able to get away with stonewalling the way Fusion GPS, the intermediary in the Steele dossier, is doing?

No. If the Trump  Jr. meeting demands a full public inquiry, so does the entire genesis and history of the Steele dossier. And I would surmise that the Steele dossier story is far more sordid and damning than Trump Jr.’s ultimately barren dalliance with Veselnitskaya. Which is exactly why a cynic like me believes an examination of the dossier’s provenance is being avoided like the plague–it would not reflect well on many, many members of the political class and federal law enforcement.

Trump Jr.’s meeting was extremely unwise because of the optics, rather than the substance. The dangers of Russian connections were already apparent, although on 9 June 2016 they were not nearly as radioactive as they would become after the Wikileaks release of the DNC emails and subsequently the Podesta emails, let alone after Hillary’s crushing loss and the consequent need for a scapegoat and a means of kneecapping the Trump presidency. It was rash for Trump Jr. (and Kushner) to meet on the basis of such sketchy hints passed on via Z-list promoters: they should have dispatched an intermediary to do a preliminary check, which almost certainly would have led to the same result as the actual meeting did, but which would have avoided the risk–which ultimately crystalized, long after the election–inherent in a face-to-face meeting between a Russian and Trump’s two closest confidents.

But facts are facts, regardless of the source. And if Veselnitskaya indeed had factual evidence of a foreign attempt to influence the US election, her dubious background would not have gainsaid those facts. And given the DNC’s and the Clinton’s history with dirty foreign connections, it was hardly wrong to entertain and investigate assertions that history was repeating.  And if the allegations were proven, they would have demonstrated what is supposedly a horrible sin–foreign interference in the US election. Trump Jr. was betting on form, and by the standards now advanced by his father’s political opponents, performing a public service of policing American elections.

 

I Don’t Think He’ll Be Very Keen. He’s Already Got One, You See

If some stranger had offered the Trump campaign the Holy Grail of Hillary Kompromat, when a conspiracy was already in place, the reaction probably would have gone something like this (at the 30-40 second mark).

Why Would You Meet With a Nobody Promising a Watch, If Putin Already Gave You a Rolex?

I presume you have heard, ad nauseum, the hyperventilating about the Donald Trump Jr. meeting with a Russian lawyer, and the email correspondence leading up to it, in which Trump Jr. expressed intense interest in the possibility that the lawyer might be able to pass some dirt on Hillary originating with the Russian government.

I think my rule of thumb that the true significance of a Trump-related revelation varies inversely with the frenzy it sets off holds here. Maybe I need to revise the rule to say the significance varies inversely with the exponential of the cube of the frenzy.

For starters, what campaign wouldn’t check out an offer of compromising material on an opponent–especially one like Hillary? And do you think that Hillary or her campaign would have passed up a similar offer? Hardly. This is the way the game is played. This is the way the game has always been played–by the Clintons in particular. Like Tip O’Neill said: politics ain’t beanbag.

And let’s not forget that the Steele digging expedition, which originated with Republican opponents to Trump but which continued with funding by as yet unnamed (why not? why no curiosity here?) Democratic operatives after Trump and Hillary had clinched their respective nominations, involved paying to get Russian dirt on Trump. So the Black Earth of the Russian steppes is open for the Democrats to plough, but is off limits to Republicans?

If the Democrats (and the media) didn’t have double standards, they’d have no standards at all.

But these things are not the biggest thing. I have yet to see anyone point out the obvious here. Namely, if in June the Trump campaign was openly interested in compromising material allegedly supplied by the Russian government, would completely undermine the dominant collusion narrative. Why meet with a Russian walk-in on the possibility she would produce official Russian kompromat if there was already an active conspiracy between the Russian government at the highest levels and the Trump campaign to obtain such information? Why meet in a public place with some woman off the street whom you don’t know from Adam’s off ox offering you a watch, when Putin has already given you a Rolex?

Yes, there are possible ways to reconcile these possibilities, but they make the story even more convoluted and baroque, and therefore less plausible.

Then there are the inconvenient realities that the woman lawyer wildly exaggerated her connections, and lied about having information. She was not a Russian government lawyer, of one thing. She was a private attorney dangling this bait solely to get a meeting, in order to importune Donnie Jr. on behalf of a sanctioned client to relax the Magnitsky Act. She then blathered about some deal involving adoptions (which she clearly had no ability to swing). Manafort–whom we are told, repeatedly, has been around the Russian block many times–realized she was a fraud: no doubt he has met her kind many a time. The meeting ended quickly, and crucially, there was no second meeting.

In other words, Natalia Veselnitskaya told a tall tale in order to break the ice. Which she then proceeded to fall through.

Veselnitskaya denies telling Trump that she was dishing dirt on Hillary. She could be right. That bait came from the intermediary to set up the meeting. Maybe he was the fabulist. Who knows? Who cares? What we know is that whoever spun it, it was a fable, and the moral of the story is that grifters lie in order to get face time with powerful people. Who knew?

So we know Trump Jr. was open to getting compromising information from Russians. Not shocking. At all.

We also know that he didn’t get any.

We also know that if he was open to it on 9 June, it is highly unlikely that there was at that time a conspiracy between the campaign and the Kremlin to discredit Hillary.

One interesting coda. Trump Jr. released the email chain related to the meeting. This set reporters, including notably one of the four (!) NYT reporters (Adam Goldman, AKA @adamgoldmanNYT) on the story and CNN’s bald, chubby, budding Kurt Eichenwald-lookalike, Hillary pom-pom squad member (I add the personal details so that you can distinguish him from the other members of the CNN cheerleading team) Brian Stelter (@brianstelter), into a foot stomping, breath holding tizzy. How dare he preempt them?!? How dare he make it impossible for them to quote selectively from the emails?!?

Goldman was shocked! Shocked! That personal emails were released. Again: if they had no double standards, they’d have no standards at all.

And by the way–how did the NYT get the emails in the first place? Seems to me that the fact that they did lends credence to Trump’s March assertion that his team was under government surveillance. But that possibility to has escaped attention. Because it doesn’t advance the mission, and indeed undercuts it.

Trump Throws Down the Civilizational Gauntlet In Warsaw

Trump’s speech in Poland was like a political Rorschach Test, or a word-association exam. If you hear the word “will”, and think Leni Riefenstahl, you just might be a leftist! If you hear the phrase “Western civilization,” and think “white supremacism”, you just might be a leftist! If  you hear the word “God”, and think “Nazi”, you just just might be a leftist!

Trump uttered all these words, and people on the left responded in exactly these ways.

On the right, the reaction was much more favorable. Trump’s themes have been staples among many conservatives and some libertarians for decades, dating back to the Cold War. Now the main perceived threat is not the godless Soviet Union, but the hyper-militant strains of a religion. But most conservatives believe that an ideology inimical to the Western heritage and Western beliefs is on the march now as it was then. Further, there were serious doubts about the will of the West to resist, then as there are today. The past does not repeat itself, but it rhymes, and Trump adapted an old tune to a new day.

Insofar as other issues that exercise some Republicans and allegedly many Democrats are concerned, Trump even criticized Russian actions in Ukraine and Syria. No, not as vigorously as John McCain and his ilk would like, but to McCain anything short of a nuclear first strike against Russia is lily livered appeasement so he can be discounted. Trump also forthrightly committed to Nato Article Five. So that should have put paid to, or at least represented a substantial down payment on, the soft-on-Russia narrative.

But those issues were largely drowned out by the shrieking on the left, and among many Europeans. And the reason why is straightforward. In reality, the left doesn’t care all that much about Russia or the Paris Accord or the like. What it is most heavily invested in, by far, is the culture war. And arguably the most important motivating belief driving the left in this war is the conviction that not only is there not anything special, valuable, or uniquely worth defending about the West, but that the West is actually a malign force that has been and continues to be the source of great evil in the world. The legacy of the West isn’t individual freedom, political democracy, the rule of law, economic and technological progress, and great works of art and literature: it is racism, sexism, colonialism, oppression, and cultural appropriation. It doesn’t need defending–it needs to be transformed past recognition, if not destroyed altogether.

About twenty years ago, a popular chant on college campuses was “hey, hey, ho, ho, Western Civ has got to go.” Ostensibly the chant was about mandatory classes in Western Civilization. But in reality, then and especially now, among many on the left it is Western civilization itself that has to go.

The seemingly strange affinity of the left for Islam, despite its diametrically opposed beliefs on women, gays, family, and the role of religion in society, is more readily understood when you grasp the left’s real enemy–the civilization that Trump stood up for. Islam is a useful ally in the war on that enemy. Given the utter incompatibility in beliefs it’s an insane alliance in the long run, but one can see the short term method in this madness. The enemy of my enemy. And this alliance reveals how the left prioritizes its enemies.

And in Warsaw Trump threw down the gauntlet and rejected all this. He not only refused to surrender, he vowed to fight, and said that there is something worth fighting for. All of which is an anathema to the left, hence the hyperbolic–and Pavlovian–response.

It’s also a very clarifying response. It shows just what the real fault line is. The supposed pressing issues of the day–Russia, climate change, trade–are really just stones that lie within easy grasp to be flung in the fight. What the fight is really about is a much deeper conflict of visions (to lift a phrase/title from Thomas Sowell) about the Western inheritance. Is it something to be conserved (recognizing that a crucial aspect of that inheritance is a capacity for great and rapid change), or is it something to be razed? Trump said the former: the frenzied reaction on the left tells you that they believe the latter.

Once Upon a Time in Annapolis

Please indulge me with a trip down memory lane. Forty years ago today I was inducted as a Plebe at the United States Naval Academy. I’m sure all you all* find that hard to believe. No, not that I went to Navy–the 40 years part

SWP Acid Flashback, CCP Edition

Sometimes reading current news about clearing specifically and post-crisis regulation generally triggers acid flashbacks to old blog posts. Like this one (from 2010!):

[Gensler’s] latest gurgling appears on the oped page of today’s WSJ.  It starts with a non-sequitur, and careens downhill from there.  Gensler tells a story about his role in the LTCM situation, and then claims that to prevent a recurrence, or a repeat of AIG, it is necessary to reduce the “cancerous interconnections” (Jeremiah Recycled Bad Metaphor Alert!) in the financial system by, you guessed it, mandatory clearing.

Look.  This is very basic.  Do I have to repeat it?  CLEARING DOES NOT ELIMINATE INTERCONNECTIONS AMONG FINANCIAL INSTITUTIONS.  At most, it reconfigures the topology of the network of interconnections.  Anyone who argues otherwise is not competent to weigh in on the subject, let alone to have regulatory responsibility over a vastly expanded clearing system.  At most you can argue that the interconnections in a cleared system are better in some ways than the interconnections in the current OTC structure.  But Gensler doesn’t do that.   He just makes unsupported assertion after unsupported assertion.

Jeremiah’s latest gurgling appears on the oped page of today’s WSJ.  It starts with a non-sequitur, and careens downhill from there.  Gensler tells a story about his role in the LTCM situation, and then claims that to prevent a recurrence, or a repeat of AIG, it is necessary to reduce the “cancerous interconnections” (Jeremiah Recycled Bad Metaphor Alert!) in the financial system by, you guessed it, mandatory clearing. Look.  This is very basic.  Do I have to repeat it?  CLEARING DOES NOT ELIMINATE INTERCONNECTIONS AMONG FINANCIAL INSTITUTIONS.  At most, it reconfigures the topology of the network of interconnections.  Anyone who argues otherwise is not competent to weigh in on the subject, let alone to have regulatory responsibility over a vastly expanded clearing system.  At most you can argue that the interconnections in a cleared system are better in some ways than the interconnections in the current OTC structure.  But Gensler doesn’t do that.   He just makes unsupported assertion after unsupported assertion.

So what triggered this flashback? This recent FSB (no! not Putin!)/BIS/IOSCO report on . . . wait for it . . . interdependencies in clearing. As summarized by Reuters:

The Financial Stability Board, the Committee on Payments and Market Infrastructures, the International Organization of Securities Commissioners and the Basel Committee on Banking Supervision, also raised new concerns around the interdependency of CCPs, which have become crucial financial infrastructures as a result of post-crisis reforms that forced much of the US$483trn over-the-counter derivatives market into central clearing.

In a study of 26 CCPs across 15 jurisdictions, the committees found that many clearinghouses maintain relationships with the same financial entities.

Concentration is high with 88% of financial resources, including initial margin and default funds, sitting in just 10 CCPs. Of the 307 clearing members included in the analysis, the largest 20 accounted for 75% of financial resources provided to CCPs.

More than 80% of the CCPs surveyed were exposed to at least 10 global systemically important financial institutions, the study showed.

In an analysis of the contagion effect of clearing member defaults, the study found that more than half of surveyed CCPs would suffer a default of at least two clearing members as a result of two clearing member defaults at another CCP.

“This suggests a high degree of interconnectedness among the central clearing system’s largest and most significant clearing members,” the committees said in their analysis.

To reiterate: as I said in 2010 (and the blog post echoed remarks that I made at ISDA’s General Meeting in San Fransisco shortly before I wrote the post), clearing just reconfigures the topology of the network. It does not eliminate “cancerous interconnections”. It merely re-jiggers the connections.

Look at some of the network charts in the FSB/BIS/IOSCO report. They are pretty much indistinguishable from the sccaaarrry charts of interdependencies in OTC derivatives that were bruited about to scare the chillin into supporting clearing and collateral mandates.

The concentration of clearing members is particularly concerning. The report does not mention it, but this concentration creates other major headaches, such as the difficulties of porting positions if a big clearing member (or two) defaults. And the difficulties this concentration would produce in trying to auction off or hedge the positions of the big clearing firms.

Further, the report understates the degree of interconnections, and in fact ignores some of the most dangerous ones. It looks only at direct connections, but the indirect connections are probably more . . . what’s the word I’m looking for? . . . cancerous–yeah, that’s it. CCPs are deeply embedded in the liquidity supply and credit network, which connects all major (and most minor) players in the market. Market shocks that cause big price changes in turn cause big variation margin calls that reverberate throughout the entire financial system. Given the tight coupling of the liquidity system generally, and the particularly tight coupling of the margining mechanism specifically, this form of interconnection–not considered in the report–is most laden with systemic ramifications. As I’ve said ad nauseum: the connections that are intended to prevent CCPs from failing are exactly the ones that pose the greatest threat to the entire system.

To flash back to another of my past writings: this recent report, when compared to what Gensler said in 2010 (and others, notably Timmy!, were singing from the same hymnal), shows that clearing and collateral mandates were a bill of goods. These mandates were sold on the basis of lies large and small. And the biggest lie–and I said so at the time–was that clearing would reduce the interconnectivity of the financial system. So the FSB/BIS/IOSCO have called bullshit on Gary Gensler. Unfortunately, seven years too late.

 

The Qatar LNG Expansion Announcement: Vaporware Meets LNG?

Qatar sent shock waves through the LNG market by announcing plans to increase output by 30 percent. Although large energy firms (including Rex Tillerson’s old outfit) expressed interest in working with Qatar on this, color me skeptical.

I can think of two other explanations for the announcement, particularly at this time.

The first is that this may be akin to a vaporware announcement. Back in the day, it was common for software firms to announce a new product or a big update of an existing product in order to try to deter others from entering that market. If entry in fact did not occur, the product announced with such fanfare would never appear. Similar to this strategy, I think it is very plausible that Qatar is trying to deter entry or expansion by North American, Australian, and African producers by threatening to add a big slug of capacity in a few years. Perhaps the developers won’t be scared off, but their bankers may be.

The surge in LNG capacity around the world has severely undercut Qatar’s competitive position, and forced it to make contractual concessions. It also threatens to erode prices for a considerable period. Even more entry would exacerbate these problems. This gives Qatar a strong incentive to try to scare off some of that capacity, and a vaporware strategy is worth a try in order to achieve that.

The second is based on the current set-to between Qatar and the Saudis and the rest of the GCC. They are all but blockading Qatar, and have made demands that bring to mind Austria-Hungary’s demands against Serbia in July, 1914: the ultimatum is designed to be rejected to give a pretext for escalation. Qatar needs to demonstrate that it is immune to the pressure. An announcement of grandiose expansion plans is a good way to signal that it is immune to pressure and not only plans to continue business as usual, but to go further. In a part of the world where showing weakness is an invitation for the wolves to pounce, putting on a bold front is almost a necessity when the wolves are already circling.

So we’ll see where this goes. But I think there’s a good likelihood that this is a big bluff.

Sunlight is the Best Disinfectant: If the Light of Day Scares You, You May Be a Germ

The Climate Change Mafia is threatening to go to the mattresses over EPA director Scott Pruitt’s plans to hold a “red team/blue team” exercise to evaluate climate science. Given the billions the US lavishes on this research, such a review is a salutary thing: but perhaps because it threatens said billions, the Mafia is going nuts:

The idea has been derided by activists and scientists who say it’s “dangerous” to elevate dissenting voices who disagree with them on global warming.

“Such calls for special teams of investigators are not about honest scientific debate,” wrote climate scientist Ben Santer and Kerry Emanuel and historian and activist Naomi Oreskes.

“They are dangerous attempts to elevate the status of minority opinions, and to undercut the legitimacy, objectivity and transparency of existing climate science,” the three wrote in a recent Washington Post op-ed.

Defenders of the “consensus” argue the existing peer-review process works well and a red-blue team dynamic is not needed. They further argue scientific bodies, like the Intergovernmental Panel on Climate Change, provide a forum for scientific debates.

“Developing science, far from being ignored, is confronted directly and openly in such assessments,” Santer, Emanuel and Oreskes wrote.

This is very, very revealing. What Pruitt is planning threatens the role of people like Santer and Emanuel as gatekeepers–although “trolls under the bridge” is probably a better metaphor. They dominate peer review, through a variety of mechanisms. They are the editors of the journals. They are the go-to referees. Look back at some of the references to peer review in the Climategate emails if you doubt this. No Little Skeptical Billy Goat or Medium Size Skeptical Billy Goat is going to make it over their bridge of peer review. But the sight of Pruitt and Trump playing the role of The Big Billy Goat Gruff has them quaking in fear.*

As for “scientific bodies, like the Intergovernmental Panel on Climate Change” providing a “forum for scientific debates”–don’t make me laugh. There was more open debate at Soviet Party Congresses in the 1930s. Again–these people dominate these forums, and like any guild or clerisy, they cannot tolerate the rise of competing forums where contrary voices may be heard.

This is all very revealing. Truly confident scientists would welcome the opportunity to prove in a very public way that they are right. They would welcome the opportunity to vanquish publicly–and if they are so right, to humiliate–their adversaries.

This lot is very fond of pointing out what transpired during the Scopes Monkey Trial. Well, here’s their opportunity to make their supposedly anti-science opposition a public laughingstock, just like Clarence Darrow did (unfairly, truth be told) in 1925. Yet they recoil at the prospect.

Telling, no?

Also telling is the refusal of many states to provide public records relating to voter registration and voting to the Trump administration’s Presidential Advisory Commission on Election Integrity. The media and the governing establishment heap scorn on anyone who dares suggest that there might be voting irregularities in the US. Well then–turn over the records so that it can be proved! If US elections in every jurisdiction in the United States are as pure as the driven snow (I snort writing that, being a Chicago native), you’d think these states would be falling over themselves to prove what a great job they are doing in achieving such an outcome, right?

They say that sunlight is the best disinfectant. Those–like the Climate Change Mafia and state election officials and pols–who shriek at the suggestion that sunlight be cast on their activities just might be germs.

* Looking back on my old Climategate posts, I stumbled across something I’d forgotten: that the Climate Mafia was truly ahead of its time in blaming its discomfiture on Russian hackers.  Just like Hillary and her minions and the media (but I repeat myself), they attempted to distract attention from the damning substance by attacking how the embarrassing emails came to light. I had a very Trumpian response, years before Trump was a political phenomenon–I praised the FSB. Hilarious.

 

Donald Trump, LNG Impressario: Demolishing the Putin Puppet Narrative

If Trump has a signature policy issue, it is promoting US energy to achieve what he calls “energy dominance.” The leading edge of this initiative is the promotion of LNG. Immediately prior to his appearance at the G20 Summit (where ironically he will be tediously hectored on trade by the increasing insufferable Angela Merkel), he will speak Thursday at the “Three Seas Summit” in Poland, where he will tout American LNG exports as both an economic and security fillip to Europe, and in particular eastern Europe.

“I think the United States can show itself as a benevolent country by exporting energy and by helping countries that don’t have adequate supplies become more self-sufficient and less dependent and less threatened,” he said.

This strikes at the foundation of Putin’s economic and geopolitical strategy. Export revenues from gas and oil keep his country afloat and his cronies flush. He uses gas in particular as a knout to bludgeon recalcitrant eastern Europeans (Ukraine in particular) and as a lever to exercise influence in western Europe, Germany in particular.

Gazprom routinely sniffs that LNG is more costly than Russian gas, and that LNG will not appreciable erode its market share. That’s true, but illustrates perfectly the limitations of market share as a measure of economic impact. The increased availability of LNG, particularly from the US, increases substantially the elasticity of supply into Europe. This, in turn, substantially increases the elasticity of demand. As the low cost producer (pipeline gas being cheaper), Russia/Gazprom will continue to be the source of the bulk of the methane molecules burned in Europe, but this increased elasticity of demand will reduce Gazprom’s pricing power and hence its revenues.

Furthermore, the effect on short-run elasticities will be particularly acute. Pre-LNG, there were few sources of additional supply available in a period of days or weeks that could substitute for Russian gas cutoff during some geopolitical power play. With LNG, the threat of shutting off the gas has lost much of its sting: especially as LNG evolves towards a traded market, supplies can swing quickly to offset any regional supply disruption, including one engineered by Putin for political purposes. So LNG arguably reduces Putin’s political leverage even more than it reduces his economic leverage. This is particularly true given complementary European policy changes that permit the flow of gas to regions not serviced by LNG directly.

Trump is getting some pushback from domestic interests in the US (notably the chemical industry) because greater exports would support prices and deprive these industries of the cheap fuel and feedstock that has powered their growth (something totally unpredictable a decade ago, when the demise of the US petrochemical industry was a real possibility). But (a) Trump seems totally committed to his pro-export course, and (b) complementary efforts to reduce restrictions on supply will mitigate the price impact. So I expect the opposition of the likes of the Industrial Energy Consumers of America to be little more than a speed bump in his race to promoting energy exports.

This all reveals Trump for the mercantilist he is: imports bad, exports good. This is economically illiterate and incoherent, but it’s Trump trade policy in a nutshell. Economic coherence aside, however, Donald Trump, LNG Impressario totally demolishes the Putin puppet narrative. Not that you’d notice–the hysteria continues unabated, because reality doesn’t matter to the soi disant reality-based community.

Here we have Trump devoting the bulk of his non-Twitter-directed energies (and he is high energy!) to promoting an economic policy that hits Putin at his most vulnerable spot, economically and geopolitically. Whatever his Russia-related rhetoric, pace Orwell, he is objectively anti-Putin.

Not that this causes neo-McCarthyites even to experience cognitive dissonance, let alone to engage in a serious re-evaluation. To them, Trump is literally a Kremlin operative in Putin’s thrall. And nothing–not even Trump venturing to the heart of the area Putin and his ilk believe to be in Russia’s sphere of influence and loudly (very loudly) proclaiming that he is offering American gas to free Europe from its energy thralldom–will divert them from their non-stop narrative.

As an aside, I do Joseph McCarthy a grave disservice by comparing today’s mainstream media, the Democratic Party, Neocons, and large swathes of the Republican establishment to him. There was actually a far more substantial factual basis for his paranoia than there is for that of the anti-Trump brigades.

There is an irony here, though. I have often sneered at Putin (and when he was president, Medvedev), for acting like a glorified Secretary of Commerce, going around being the pitchman for Russian economic interests, in energy in particular. Stylistically, Trump is doing somewhat the same. But substantively, in Making American Energy (LNG particularly) Great, Trump is giving Putin a good swift kick in the stones.

Not that the promoters of the New Red Scare are paying the slightest heed. Which demonstrates that theirs is a completely partisan and grotesquely intellectually dishonest campaign.