Sunday, July 24, 2016

Let’s Talk Turkey

I have read perhaps a dozen posts analyzing the attempted coup in Turkey; I have listened to a half-dozen interviews on this topic.  Some of the authors and speakers are quite certain they know the backstory (or what isn’t the backstory), and some are not.

Initially I was rather certain that it was Erdogan behind this event – staged.  Much – but not all – of what I have read or heard since then disagrees on this point.  No matter the source or opinion, some of the arguments are reasonable; some are (in my opinion) flawed.  I certainly am unable to find a consistent and reasonable string on the backstory.

I am left to consider the end point and work backwards.  Who benefits from this event?

Whether a staged event or not, the winner is Erdogan.  In so many ways he was losing his power and control over Turkey – to say nothing of his dreams of power over a wider swath of the Muslim Middle East.  This event has afforded him the leeway within Turkey to purge – and purge he is doing.  This event has increased his popularity among the Muslim religious base.  This event will likely drive the middle and upper-class secular / moderate Muslims out of the country for fear of what is coming, reducing those who oppose Erdogan.  This event has united the average Turkish citizen behind him.

Whether staged or not, a second winner in this case is Russia as it seems to be the case that Turkey is moving away from the West and toward Russia.

What if the attempt was legitimate?  Who benefits from overturning Erdogan?

First is NATO, not appreciating recent overtures by Erdogan toward Russia and perhaps concerned that Erdogan is turning Turkey into an unstable partner.  In this case one would obviously include factions of the Turkish armed forces, desiring to remain in NATO.

Second are those who are looking for further chaos in the region.  A successful coup could only result in an expanded civil war in Turkey.  As the United States government has been the prime mover for regional chaos, one need look no further than here.

Third are those who would like to see increased Muslim immigration into Europe, thus further destabilizing Europe. 

All three of these share an important feature – the same groups both benefit from and could be behind the act.


I do not have one.  I certainly do not have a firm answer on the questions: who was behind this event and why?

As the attempt failed (or was intended to fail), the one who most benefits – and benefits directly – is Erdogan.  Second, it seems to me, is Putin and Russia.

In the days after the coup, the narrative was offered that it was Russia who warned the Turkish government just hours before the coup was to begin; this is what foiled the coup attempt.  Whether this is true or not is somewhat irrelevant; that these two parties find it a convenient narrative is perhaps all that is relevant. 

This is to say nothing of the rapprochement between these two governments in the several weeks leading up to the coup attempt.

Monday, July 18, 2016

Trump’s Foreign Policy

After the unfortunate choice of Mike Pence as his running mate it was nice to find this interview of Trump’s foreign policy advisor, Mike Flynn, the former director of the Defense Intelligence Agency (DIA). 

While not Ron Paulian, Flynn (to the extent he is to be believed and to the extent he represents Trump’s views) offers a few statements that would never come out of Clinton’s mouth.  Unfortunately, for the most part there is little meat on the bones of these statements.

Regarding Trump’s statements on NATO and US military leadership around the world:

[Trump] has no intention to step away without examining all relationships that we have. …I would say that NATO as a political alliance does need to be relooked at in terms of everything -- resourcing, capabilities.

We have to look at the cost of resourcing the US military around the world.  …The Chinese get over 40 percent of their oil from the Middle East through the Persian Gulf, but have you ever seen a Chinese aircraft carrier sitting inside the Persian Gulf?

Flynn makes many similar statements in the interview.  The only issue for Trump about NATO and US global intervention seems to be one of who will pay for it; a good conservative position, but not necessarily beneficial toward reducing conflict. 

If Trump can’t get others to pay, does this mean he will support less foreign interventionism?  Because for sure others will not be able to pay.

…the United States should not have to intervene in every single problem around the world. The voters of this country are reacting in a very big, broad way to Mr. Trump.

“Should not have to intervene” does not really say much of anything about commitment.

Regarding Trump’s statement that Merkel was too soft during the refugee crisis…

I think all of Europe has been too soft on the refugee crisis. …But the point was the really incredibly poor decisions when it comes to allowing this unbelievable, unprecedented refugee crisis that's going on in Europe.

A great statement.

Why are these people rushing to the beauty and strength of Europe and to the United States and not rushing to their own capitals or the capitals of the Muslim world?

Because the enemy of the elite is the (nominally) Christian, white male.  Well, that, and the US (and some other Muslim countries) blew up their capitals in the Muslim world.

Regarding Trump’s “fascination for strong leaders like Vladimir Putin or Saddam Hussein”:

He respects people who are selfish about their country. Putin is a guy who is very selfish about Russia and about the Russian federation….

Nationalism and decentralization are growing in popularity throughout the west, and will continue to grow as the solutions offered by the centralizers continue to crumble.

Friday, July 15, 2016

Prelude to the Great War: Russia

[Russia] is a riddle, wrapped in a mystery, inside an enigma…
-        Winston Churchill, October 1939

While this quote is taken from a time 25 years after the beginning of the Great War, it is certainly applicable to the Russia of 1914 as well….


In September 1908 at the Austrian foreign minister’s castle in Buchlau, Russian foreign minister Alexander Izvolski stepped into it; best to simply describe the aftermath, as who agreed to what is somewhat murky:

Russia would look benignly on the annexation of Bosnia-Herzogevina by the Dual Monarchy…. In return, Vienna would support Russia’s attempt to seek a new international agreement opening the [Turkish] Straits to its warships.

Izlovski either never agreed to this or stated he would take the proposal back to the Tsar.  After much wailing and gnashing of teeth (and after an ultimatum from Austria’s ally Germany), the annexation was recognized by Russia.

Bargaining away two Slavic provinces to the Catholic monarchy was a bit too much for many Russians to accept – a betrayal of Slavdom.

Peace at Almost Any Cost

So said Vladimir Kokovtsov, Russia’s Prime Minister from 1911 – 1914. 

Any system that produced leaders of his character could not be all bad.

He proposed many reforms to benefit the working class – even by this time Russia had seen significant work strikes and the like.  The industrialists opposed these reforms.  Eventually, a watered-down version of reforms was passed in 1912.  He also supported subordinating foreign to domestic policy; Russia needed an extended period of peace in order to properly deal with pressing internal issues.

Opposite stood the minister of war, General Sukhomlinov.  His beautiful and expensive wife apparently motivated him to accept bids (greased by bribes) from Vickers from machine guns that were priced 43% higher than competitive bids from Russia’s Tula Armament Works.  As such, Russia entered the war with one-sixth the number of machine guns that Germany had.

As early as 1912, Sukhomlinov was pressing for mobilization of the Russian army on the Austrian frontier – apparently at the Tsar’s request.  Ultimately cooler heads prevailed, and mobilization almost certain to lead to war was averted…for the time.


Having amazingly stopped the internal bleeding of the child Alexis, Rasputin won permanent favor in the court of Nicholas and Alexandra. 

Accusations of spying on the Tsars daughters while they changed into nightgowns; raping nuns; sinning so that the quantity of sin in the world would be reduced.  None of these dissuaded the royals from keeping trust with him.

The Money Multiplier…

John Tamny has written a book, Who Needs the Fed?  It was reviewed by Jonathan Newman at the Mises site.  Tamny is offering a rebuttal to a few of Newman’s comments.  I have decided to stick my nose in the middle of this.  I will not go point by point, as there is much more in Tamny’s post than I care to deal with.  In fact, I am only going to comment on one item.

It was regarding a Tamny post some years ago that I wrote something on the money multiplier.  It was quickly pointed out how I stepped into it; I then backed off, but did not feel completely settled.  I believe I know better today (or not, let’s see what response I get to this post).

Explicit in the Austrian view of banking is that $100 deposited in Bank A is loaned to another individual who deposits (assuming a 10% reserve requirement) $90 in Bank B, and then Bank B lends $81 to an individual who deposits the funds in Bank C. To Austrians $100 deposited with a bank quickly becomes $271; presumably on the way to infinity.

Missed by Austrians focused on the lending of money among many is that with the previously mentioned scenario, there's still only $100. To save is to give up use of money to someone else.

Tamny argues that there is no money multiplier – in my previous post I agreed.  In this post I will agree…and disagree.

My mistake in my first post was that I was thinking of an all-cash economy – no checks, no debit cards, no credit cards.  In this case, Customer A deposits $100 with (in reality loans $100 to) Bank B.  It is physical cash that Customer A deposits (for this example to be meaningful, the physical cash must be backed by something – even if it is backed only by the risk that the bank defaults due to issuing too much of it).  Customer C borrows $90 cash from Bank B.  The bank is now holding $10 cash and has a note from C for the $90 owed to B.

There is no multiplier.  And for this, I don’t care about the balances held in each individual’s account (or the sum of the two balances: $190).  What matters only is the cash drawn from the accounts.  There is only $100 ($10 with the bank and $90 with C) and some notes – a note from Bank B to customer A for $100, and a note from customer C to the bank for $90.  There is no multiplier if all deposits and withdrawals – meaning also all payments – were made in cash. 

But we do not live in an all cash world, and this is where I believe I went off the rails the first time.  In today’s world, A has a bank balance of $100; C has a bank balance of $90; and, to complete Tamny’s example, D has a bank balance of $81.

To keep it simple, I will focus on debit cards – not credit cards, not checks, not Apple Pay, not PayPal.  With the debit card, each use results in a simultaneous transfer of funds from my account to someone else’s account.  (This unlike cash, where I go to the bank, withdraw $10 and walk around with it for a while, and always keep a balance of cash in my wallet.)

At the same moment, all three of us (A, C, and D) could spend our entire $271.  To keep it simple, let’s say we spent it with each other, thus draining and replenishing our bank balances simultaneously.  To keep it simpler, we all bank with the same bank.

We were able to spend $271, not $100 (technically, not $90 – as the bank is keeping $10 for no one to spend).  No one “[gave] up use of money to someone else,” yet both the depositor and someone else received balances to use.

The balances never leave the system.  Every withdrawal is a simultaneous deposit, and all $271 can be withdrawn simultaneously because it is also deposited simultaneously.  This is impossible in a cash economy, but possible with debit cards (and, with slight twists, all other electronic forms of deposits / withdrawals).

Now, back to my simplifying assumption – all three of A, C, and D trade only with each other and they all bank at Bank B.  It turns out this is not a simplifying assumption; it is reality.

…while I'm all for ending the Fed simply because it doesn't and never has served any useful purpose…

But it did and does serve a “useful purpose.”  Among many other “useful purpose[s]” overlooked by Tamny, the Fed offers a completely closed-loop system – no chance that funds leave the system (other than the almost trivial physical cash balances held).  Everyone who uses US Dollars trades with each other; everyone who uses US Dollars banks at the Fed.

The Fed has eliminated competition; the Fed (along with government deposit insurance, which technically is not necessary given the powers held by the Fed) ensures no risk of damaging bank runs.


So, in my previous post I was right – there is no multiplier – but I should have added: in an economy where all withdrawals and deposits are made in cash.  Individual bank balances might say one thing, but balances available to spend are strictly based on cash held.

I was also wrong – there is a multiplier in an economy where virtually all (or even some meaningful portion of) deposits and withdrawals are electronic and the system is closed-loop.  It is this world in which we live.

I am willing to be right…or wrong about any and all of this; let me know.

Thursday, July 14, 2016

A Lying Politician

Britain’s new top diplomat Boris Johnson came under sharp fire from his European counterparts Thursday, with France’s foreign minister declaring that the British “leave” campaigner had “lied a lot” during the push to break with the European Union.

Can we all agree that liars are no longer allowed to hold any political office or bureaucratic appointment?  If so, this will be the single-greatest result from the Brexit vote.

Absent this, I prefer that more politicians are like Johnson (described as “cheerfully undiplomatic”).  A small sampling will suffice:

Johnson has a long history of colorfully insulting other nations and leaders….

German and French politicians may have little tolerance for a man who during the referendum campaign compared E.U. efforts to unify Europe with Napoleon and Hitler.

…such as Papua New Guinea – which Johnson once suggested boasted orgies of cannibalism and chief-killing…

Johnson has criticized President Obama as a “part-Kenyan” who harbored anti-British attitudes because his father’s nation was once part of the British Empire.

In May, he penned a naughty limerick suggesting that Turkish President Recep Tayyip Erdogan had “sowed his wild oats with the help of a goat, but he didn’t even stop to thankera.”

Lord, if you are going to continue to curse us with politicians, please give us more like Johnson.

The Divisiveness Between Our Police and Our Citizens

“There are no words to describe the atrocity that occurred to our city. All I know is that this must stop, this divisiveness between our police and our citizens.”

-        Dallas Police Chief David Brown, in the wake of the recent shooting of five police officers and several others

Mr. Brown, most (but not all) of the causes behind the divisiveness are due to decisions made by individuals well above your pay grade. 

I offer a few simple actions that can be taken immediately in both Washington DC and in every state capital around the country – these actions will have immediate beneficial effect toward ending the “divisiveness between our police and our citizens.”

1)      Eliminate all laws regarding victimless crimes – including, and especially, drug laws
2)      Eliminate minimum wage laws
3)      End civil asset forfeiture

As soon as these are ended, several benefits will be immediately realized: the number of negative interactions between police and citizens will be overwhelmingly reduced; more fathers will be free of prison, available to tend to their families; low-skilled and unskilled individuals can work legally; police will have far less incentive to stop and search the citizens.

I could write more – end the subsidies for fatherless families and end public education, for example.  However these are much more complex.  The above items can be ended tomorrow without concern. 

Of course, that we live in a society where it is legal for government employees to commit crimes contributes to this divisiveness.  It is also true that residents of high-crime neighborhoods can and should take matters into their own hands.

But if we don’t want to continue on this certain slide toward ever-more divisiveness, enacting the above-listed items will go a long way.  Police and citizens are fighting an uphill and losing battle as long as measures such as the above remain in place.

Tonight (July 14) Obama will hold a town hall on the topic of race relations, justice, policing and equality.  Let’s see if he is truly interested in improving race relations, justice, policing and equality or if he is interested in doubling-down on the status quo.

Sadly, I know the answer already.