Our So-Called Foreign Policy: Two German Tank Decision Mysteries

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Germany, Iron Cross, Leopard, Nazi Germany, Our So-Called Foreign Policy, Panzer, Prussia, tanks, Ukraine, Ukraine War, World War II

Germany has finally decided to send advanced battle tanks to Ukraine (and to allow other countries whose militaries use the weapon to do te same). So ends a period of reluctance that was widely (and in my view, correctly) attributed in large measure to Berlin’s reluctance to suggest that historic German hyper-militarism is on the way back. Even so, I find two related aspects of Germany’s decision puzzling, to say the least.

At the outset, though, let me be perfectly clear: I’ve long advocated major German (and, for that matter) Japanese rearmanent. Believe me, I understand why the Germans (and Japanese) have long resisted such measures, and why Washington has tacitly supported the resulting defense free-riding.

After all, even nearly eight decades after these countries ignited World War II and committed such unspeakable atrocities before and during the conflict, who would support risking a repeat lightly? (At the same time, permitting Germany and Japan to remain military pygmies meant that American leaders would remain the national security and geopolitical kingpins of Western Europe and East Asia long after both countries had regained the economic power that ordinarily would have led to much more influence along these lines and likely greater diplomatic independence from Washington. Why? Because…well…countries with dramatically different historical experiences and geographic locations naturally often view the world differently.)

But because economic strength inevitably produces the ability and therefore the will to assert uniquely national interests, I always believed that this U.S. approach was simply delaying not only the inevitable, but the kind of orderly transition to the point at which these countries (in tandem with their neighbors, in the case of Germany but not so much Japan) would handle their own defense – and greatly reduce the nuclear war risk America was running because of its deterrence and coupling strategy.

And in a purely military sense, I always worried about the prospect of the United States plunging into a major war in Europe or Asia without allies it could count on one hundred percent – either because they stayed so weak or because they didn’t endorse American policy fully.  

Nor did I ever see any significant evidence that America’s determination to conduct these countries’ national securiy strategies for them (which I called “smothering”) generated any benefits for the U.S. economy. If anything, prioritizing alliance relationships typically convinced Washington to allow such allies to continue the protectionist policies that harmed domestic U.S. industry and its workers. (See this 1991 article for a wide-ranging discussion of both alliance-related security and economic issues.)

So again, I strongly support both the German, Japanese, and other allies’ stated intentions to get serious about their own security. But I have two related questions about Germany.

First, if Germany is so worried about even perception that it’s reverting back to its terrible old ways, why since the end of has it chosen the Iron Cross as the symbol of its military? Granted, it’s not the same Iron Cross the Nazis used. But it’s really close. Moreover, this version was used by the 19^th century Prussians, who were pioneers in developing modern militaries and whose leaders in those days had no compunctions about throwing its weight around first to unify Germany and then ensure that it could rival and even surpass the rest of Europe in terms of continental and global clout. (Not that these neighbors were angels themselves.)

And yet, in 1956, when the German army was reconstituted, West Germany’s president designated as its official emblem. Like no other choices were available then, or have been since? (For a brief history of Iron Cross, see here.) 

Second, why would a long-neutered Germany call any of its tanks a “Leopard”? How could such nomenclature fail to evoke the Nazi era in particular? After all, Hitler’s most famous tanks were the Panther (Panzer) and a late variation (the Tiger). Of course, weapons names should convey might and ferocity. But the world isn’t exactly shrt of other animal predators. And animal predator names aren’t the only words that can do the job.

Obviously, I’m not expecting any revival of worrisome German revanchism. But I still view these two military branding decisions as head-scratchers, and because even the weirdest choices rarely come completely out of the blue, I’ll continue to find them mystifying until I see a sensible explanation.    

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(What’s Left of) Our Economy: Why the U.S. Inflation Outlook Just Got Even Cloudier

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CCP Virus, China, consumer price index, consumers, core CPI, coronavirus, cost of living, COVID 19, CPI, energy prices, Federal Reserve, food prices, inflation, Jerome Powell, prices, recession, stagflation, stimulus, supply chains, Ukraine War, Wuhan virus, {What's Left of) Our Economy

If the big U.S. stock indices didn’t react enthusiastically to yesterday’s official American inflation figures (which were insensitively released the very day I had a minor medical procedure), that’s because they were too mixed to signal that consumer prices were finally being brought under control.

Lately, good news on inflation-fighting has been seen as good news for stock investors because it indicates that the Federal Reserve may at least pause its campaign to hike interest rates in order to slow economic growth significantly– and even trigger a recession. That’s because a weaker economy means consumers will have less money to spend and that businesses therefore will find it much harder to keep raising prices, and even to maintain prices at currently lofty levels. And all else equal, companies’ profits would take a hit.

So already softening inflation could convince the central bank that its efforts to date have been good enough, and that its goal of restoring price stability can be achieved without encouraging further belt tightening – and more downward pressure on business bottom lines.

Of course, stock investors aren’t always right about economic data. But their take on yesterday’s figures for the Consumer Price Index (CPI), which cover December. seems on target.

The data definitely contained encouraging news. Principally, on a monthly basis, the overall (“headline”) CPI number showed that prices actually fell in December – by 0.08 percent. That’s not much, but this result marks the first such drop since July’s 0.02 percent, and the biggest sequential decline since the 0.92 percent plunge recorded in April, 2020, when the economy was literally cratering during the CCP Virus’ devastating first wave. Further, this latest decrease followed a very modest 0.10 percent monthly increase in November.

So maybe inflation is showing some genuine signs of faltering momentum? Maybe. But maybe not. For example, that CPI sequential slip in July was followed by three straight monthly increases that ended with a heated 0.44 percent in October.

Moreover, core CPI accelerated month-to-month in December. That’s the inflation gauge that strips out food and energy prices because they’re supposedly volatile for reasons having little or nothing to do with the economy’s underlying inflation prone-ness.

December’s sequential core CPI rise was 0.30 percent – one of the more sluggish figures of the calendar year, but a rate faster than a November number of 0.27 percent that was revised up from 0.20 percent. Therefore, these last two results could signal more inflation momentum, not less.

In addition, as always, the annual headline and core CPI numbers need to be viewed in light of the baseline effect – the extent to which statistical results reflect abnormally low or high numbers for the previous comparable period that may simply stem from a catch-up trend that’s restoring a long-term norm.

Many of the multi-decade strong year-to-year headline and core inflation rates of 2021 came after the unusually weak yearly results that stemmed from the short but devastating downturn caused by that first CCP Virus wave. Consequently, I was among those (including the Fed) believing that such price rises were “transitory,” and that they would fade away as that particular baseline effect disappeared.

But as I’ve posted (e.g., last month), that fade has been underway for months, and annual inflation remains powerful and indeed way above the Fed’s two percent target. The main explanations as I see it? The still enormous spending power enjoyed by consumers due to all the pandemic relief and economic stimulus approved in recent years, and other continued and even new major government outlays that have put more money into their pockets (as listed toward the end of this column).

(A big hiring rebound since the economy’s pandemic-induced nadir and rock-bottom recent headline unemployment rates have helped, too. But as I’ll explain in an upcoming post, the effects are getting more credit than they deserve.)

And when you look at the baselines for the new headline and core CPI annual increases, it should become clear that after having caught up from the CCP Virus-induced slump, businesses still believe they have plenty of pricing power left, which suggests at the least that inflation will stay high.

Again, here the inflation story is better for the annual headline figure than for the core figure. In December, the former fell from November’s 7.12 percent to 6.42 percent – the best such number since the 6.24 percent of October, 2021, and the sixth straight weakening. The baseline 2020-2021 headline inflation rate for December was higher than that for November (6.83 percent versus 7.10 percent), and had sped up for four consecutive months. But that November-December 2020-2021 increase was more modest than the latest November-December 2021-2022 decrease, which indicates some progress here.

At the same time, don’t forget that the 6.24 percent annual headline CPI inflation of October, 2020-2021 had a 2019-2020 baseline of just 1.18 percent. Hence my argument that businesses today remain confident about their pricing power even though they’ve made up for their pandemic year weakness in spades.

In December, annual core inflation came down from 5.96 percent to 5.69 percent. That was the most sluggish pace since December, 2020-2021’s 5.48 percent, but just the third straight weakening. But the increase in the baseline number from November to December, 2021 was from 4.59 percent to that 5.48 percent – bigger than the latest November-December decrease. In other words, this trend for core CPI is now running opposite it encouraging counterpart for headline CPI.

Finally, as far as baseline arguments go, that 5.48 percent December, 2021 annual core CPI increase followed a baseline figure the previous year of a mere 1.28 percent. Since the new annual December rate of 5.69 percent comes on top of a rate more than four times higher, that’s another sign of continued business pricing confidence.

But the inflation forecast is still dominated by the question of how much economic growth will sink, and how the Fed in particular will react. And the future looks more confusing than ever.

The evidence for considerably feebler expansion, and even an impending recession, is being widely cited. Indeed, as this Forbes poster has reported, “The Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters indicates the highest probability of a recession over the next 12 months in the survey’s 55-year history.”

If they’re right, inflation may keep cooling modestly for a time but still remain worrisomely warm. And the Fed may react either by keeping interest rates lofty for longer than expected – as Chair Jerome Powell has already said – or even raise them faster. 

Nonetheless, although the recession that did take place during the first and second quarters of last year convinced numerous observers that worse was yet to come, the third quarter saw a nice bounceback and the fourth quarter could be even better. So if a downturn is coming, it will mean that economic activity will need to shrink very abruptly. Hardly impossible, but hardly a sure thing.

And if some form of economic nosedive does occur, it could prompt the Fed to hold off or even reverse course to some extent, even if price increases remain non-trivial. A major worsening of the economy may also lead Congress and the Biden administration to join the fray and approve still more stimulus to cushion the blow.

Complicating matters all the while – the kind of monetary stimulus added or taken away by the central bank takes months to ripple through the economy, as the Fed keeps emphasizing.  Some of the kinds of fiscal stimulus, like the pandemic-era checks, work faster, but others, like the infrastructure bill and the huge new subsidies for domestic semiconductor manufacturing will take much longer.

Additionally, some of the big drivers of the recent inflation are even less controllable by Washington and more unpredictable than the immense U.S. economy – like the Ukraine War’s impact on the prices of energy and other commodities, including foodstuffs, and the wild recent swings of a range of Chinese government policies that keep roiling global and domestic supply chains. 

My own outlook? It’s for a pretty shallow, short recession followed by a comparably moderate recovery and all accompanied by price levels with which most Americans will keep struggling. Back in the 1970s, it was called “stagflation,” I’m old enough to remember that’s an outcome that no one should welcome, and it will mean that the country remains as far from achieving robust, non-inflationary growth as ever.  

Our So-Called Foreign Policy: A Wall Street Kingpin Lays a Grand Strategy Egg

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America First, China, climate change, ESG, fossil fuels, globalism, globalization, Immigration, industrial policy, Jamie Dimon, JPMorgan Chase, Our So-Called Foreign Policy, productivity, supply chains, The Wall Street Journal, Ukraine War, Wall Street, woke capitalism

In several senses, it’s not entirely surprising that The Wall Street Journal recently allowed Jamie Dimon to share his thoughts on the domestic and especially global grand strategies the United States should pursue in the post-Ukraine War world.

After all, Dimon heads JPMorgan Chase, the nation’s biggest and most important bank. As a result, he clearly needs to know a lot about the U.S. economy. And as Wall Street’s biggest poohbah, he surely must know a lot about the state of the world overall – in particular since he’s had extensive contacts with the heads of state, senior officials, and business leaders of many countries.

What is somewhat surprising, then, is how little of Dimon’s analysis and advice is new or even interesting, and how much of it could well put America ever further behind the eight-ball.

Dimon’s article wasn’t completely devoid of merit. Since he’s dabbled in some (symbolic) woke-ism himself, it was good to see him seemingly take a shot at what’s become mainstream liberal as well as radical lefty dogma by urging the education of “all Americans about the sacrifice of those who came before us for democracy at home and abroad.”

Given the strong support by the Biden administration and by some finance bigwigs for influential for encouraging and even requiring lenders to take climate change risks into account when extending credit, it was encouraging to read his pragmatic position that “Secure and reliable oil and gas production is compatible with reducing CO2 over the long run, and is far better than burning more coal.”

Dimon showed that, unlike many on Wall Street, he supports some forms of industrial policy to make sure that “we don’t rely on potential adversaries for critical goods and services.”

And he endorsed the larger point that the neoliberal globalization-based triumphalism that undergirded the policies of globalist pre-Trump Presidents needs to be buried for good:

“America and the West can no longer maintain a false sense of security based on the illusion that dictatorships and oppressive nations won’t use their economic and military powers to advance their aims—particularly against what they perceive as weak, incompetent and disorganized Western democracies. In a troubled world, we are reminded that national security is and always will be paramount, even if it seems to recede in tranquil times.”

But on most of the biggest issues and just about all specifics, Dimon either punted or retreated into the same globalist territory that proved as profitable for Big Finance as it was too often dangerously naive for the nation as a whole.

For example, he wants Washington to “fix the immigration policies that are tearing us apart, dramatically reducing illegal immigration and dramatically increasing legal immigration.” Completely ignored is the depressing impact the latter would have on wages that have already been falling recently in inflation-adjusted terms, and on desperately needed productivity growth – as a bigger supply of cheap labor is bound to kill many incentives for businesses to improve their efficiency by innovating technology-wise or devising better management approaches.

And on China, Dimon’s clearly determined to talk his company’s book, insisting that “We should acknowledge that we have common interests in combating nuclear proliferation, climate change and terrorism.” and blithely predicting that “Tough but thoughtful negotiations over strategic, military and economic concerns—including unfair competition—should yield a better situation for all.”

But most important, Dimon fully endorses the foundations of the very globalist strategy that for decades perversely ignored the distinctive and paramount advantages the United States brings to world affairs and has thereby created many of the dangers and vulnerabilities with which the nation has been struggling.

The way Dimon seems to see it, there’s no reason to pay any attention to the extraordinary degree of security the America enjoys merely by virtue of its geographic isolation and powerful military; or to its extraordinary degree of economic self-sufficiency thanks to its immense and diverse natural resource base, its technological prowess, and its dynamic free market-dominated economic system. And evidently, it’s just as pointless to concentrate foreign and economic policy on the nation’s equally formidable potential to build on these advantages.

Instead, like other globalists, Dimon flatly rejects the idea that “America can stand alone,” or should seek to maximize its ability to do so. Instead, it should keep defining nothing less than “global peace and order” as “a vital American interest” – the standard globalist recipe for yoking the country’s fate to an agenda of more open-ended military interventions, more hastily approved and usually wasteful foreign aid, and more nation-building in areas lacking any ingredients of nation-hood.

Asa result, it would anchor America’s safety and prosperity on efforts to shape foreign conditions (over which is has relatively little control), rather than on efforts to shape domestic conditions (over which is has much more control). (For a much fuller description of this America First strategy and its differences with globalism, see this 2018 article.) 

In fact, and revealingly, Dimon’s piece was titled “The West Needs America’s Leadership.” If only he and other globalists would start thinking seriously about what America really needs. 

(Full disclosure:  I own several JPMorgan bond and preferred stock issues.)    

 

Our So-Called Foreign Policy: A Republican Strategy Guru Who Ain’t

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China, Marc A. Thiessen, Mike Gallagher, national security, neoconservatives, North Atlantic treaty Organization, Our So-Called Foreign Policy, priorities, Republicans, Russia, semiconductors, strategy, Taiwan, Ukraine, Ukraine War

Neoconservative pundit Marc A. Thiessen has just written that neconservative Congressman Mike Gallagher of Wisconsin is the type of Republican who he thinks should “guide the Republican Party into the next era and shape conservative public policy, from national security to health to education to the economy.”

I’m far from convinced, especially on the national security front that’s the focus of this column, since Gallagher’s expressed views seem like a formula for exactly the kind of global over-extension that’s backfired so disastrously on America in the past (Google “Vietnam” or “Middle East.”)

This Wisconsin Republican’s main problem is one that’s dogged not only neocons and their constant exhortations for the United States to play or resume playing globocop indefinitely, but many other American leaders, including those on the Left – who favor similarly open-ended U.S. involvement in all manner of foreign crises and problems but either on the cheap, or with all manner of aesthetically and morally pleasing substitutes for military power, or coercion of any kind.

It’s a failure or an refusal to base American strategy and security and prosperity on the only basis practical even for a superpower – as an effort to (a) secure or defend goals that will promote U.S. interests on net in specific, concrete ways –  like protecting countries or regions with important locations, or that possess needed resources; and (b) propose feasible approaches to generate the wherewithal needed to achieve those goals.

Put simply, a successful U.S. foreign policy needs to set priorities of some kind, and in an interview with Thiessen, Gallagher explicitly rejected these premises, at least when it comes to two current headline overseas challenges.

According to Gallagher,

“[T]his idea that, ‘Well, we can be tough on China, but we have to strike some grand bargain with [Russian President Vladimir] Putin in Europe because our resources are limited.’ I just think that reflects a naive view of the way the world is working right now.”

He did explain that

“for those of us who want to continue to support the Ukrainians and deliver a massive loss to the Russians … we have to do a better job of tying the threat posed by Russia to the threat posed by the Chinese Communist Party. And it’s really teasing out the fact that for at least a decade, if not longer, these countries, who at times have interests that diverged and at times were outright hostile, at least in the present day, have locked arms to wage a new Cold War against the West….”  

As for “the ultimate aim of China in particular”? That’s “to destroy the capitalist system led by the United States and make way for the ultimate triumph of world socialism with, you know, Chinese characteristics.”

I have no quarrel with Gallagher’s assumption of deep and dangerous Chinese hostility to the United States. And he has, in my view correctly and cogently, identifed several branches of China’s strategy that seek to weaken America from within, like propaganda spreading (which – I assume – he understands requires strong, overwhelmingly domestic policy responses).

But the other stuff – if you think about it logically, it simply doesn’t matter. That is, whether or not the Chinese and Russians are in cahoots, and however sweepin their aims, because different countries’ and regions’ importance to the United States varies dramatically (since they’re all so different in their characteristics), it’s inevitable that some of the targets of this “new [joint] Cold War” that they’re supposedly waging will significantly affect America’s fortunes, and some won’t.

And what Gallagher doesn’t come to terms with is 

>(a) all the evidence cited by opponents of current U.S. Ukraine policy (like me), that Ukraine’s fate is irrelevant to America for reasons ranging from its tragic location right next to Russia and its lack of any assets needed by America to the continued refusal of the United States and its allies to admit it into the North Atlantic Treaty Organization (which implicitly acknowledges Ukraine’s  marginality); and

>(b) all the evidence that Taiwan is of vital importance – because of its matchless ability to manufacture the advanced semiconductors that are keys to ongoing U.S. security and prosperity, and therefore to America’s ability to keep fending off Chinese ambitions to control the island and this knowhow.

In Gallagher’s defense, he’s a strong proponent of the much bigger defense budgets that the United States would need to field the forces and weapons needed to resist both Russia’s Ukraine aims and China’s Taiwan aims.

But that higher spending will take many years to shore up American battlefield capabilities further, and Gallagher himself believes that the United States can’t defend Taiwan now, and doesn’t foresee success for another five years.

Worse, in the meantime, it’s being reported, including by a bipartisan Congressional commission, that “[t]he diversion of existing stocks of weapons and munitions to Ukraine and pandemic-related supply chain issues has exacerbated a sizeable backlog in the delivery of weapons already approved for sale to Taiwan, undermining the island’s readiness.”

So current American priorities could well be exactly backwards, and even if not, contrary to Gallagher’s blithe prior assertion, American resources are now in fact severely limited.

To top if all off, Gallagher also told Thiessen that by 2025 (if the Chinese haven’t already invaded), the President then should declare that “defending Taiwan [is] our most urgent national security priority….” But what about Ukraine? By then it’ll be No Big Deal? Or it’s safe to assume that conflict will be over? Nothing from Gallagher on that. But he did add that “by the way, I don’t think [keeping Taiwan secure] would cost that much money.”

Thiessen introduced Gallagher as someone who “has a bachelor’s degree from Princeton, a master’s degree in security studies from Georgetown University, a second master’s in strategic intelligence from the National Intelligence University and a PhD in international relations from Georgetown — all of which mean he’s deeply overqualified for any national security position.”

To me, what he’s really done is unwittingly reveal some of the institutions you want to avoid like the plague if you hope to develop a U.S. foreign policy strategy worthy of the name.

Glad I Didn’t Say That! A New Low Point for Biden Energy Policy

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Amos Hochstein, Biden administration, clean energy, climate change, energy, fossil fuels, Glad I Didn't Say That!, green energy, natural gas, oil, Russia, sanctions, shale, Ukraine, Ukraine War

“The White House’s chief energy adviser has described as ‘un-American’ the refusal of US shale investors to ramp up drilling, even as Moscow’s invasion of Ukraine causes havoc on global oil and gas markets.”                                                      – — — —

Financial Times, December 11, 2022

 

“The longer-term solution, [he said] was not to invest in more natural gas supply but to cut consumption of fossil fuels themselves….”             

Financial Times, December 11, 2022

 

(Source: “Biden adviser calls Wall Street opposition to shale drilling ‘un-American’,” by Derek Brower, Financial Times, December 11, 2022, Biden adviser calls Wall Street opposition to shale drilling ‘un-American’ | Financial Times (ft.com))

Following Up: Podcast On-Line of NYC Radio Interview on Inflation, the Midterms, and Ukraine

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Biden, election 2022, Following Up, Frank Morano, inflation, midterms 2022, nuclear war, Ukraine, Ukraine War, WABC AM

I’m pleased to announce that the podcast is on-line of my inteview last night on Frank Morano’s popular “The Other Side of Midnight” program on New York City’s WABC-AM. The segment focused on the (inflationary) state of the U.S. economy, its likely impact on next week’s midterm elections, and why President Biden urgently needs to change a Ukraine policy that’s needlessly exposing the United States to the threat of nuclear war. Here’s the link.

And of course keep on checking in with RealityChek for news of upcoming media appearances and other developments.

Our So-Called Foreign Policy: Is Biden Learning the Limits of Multilateralism?

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Afghanistan, alliances, allies, America First, ASML, Biden, Biden administration, Blob, China, Chips Act, Europe, export controls, Japan, multilateralism, NATO, North Atlantic treaty Organization, oil, oil price, OPEC, Our So-Called Foreign Policy, Saudi Arabia, semiconductors, South Korea, Taiwan, Ukraine War

Remember the buzz worldwide and among the bipartisan globalist U.S. foreign policy Blob that Donald Trump’s defeat in the 2020 presidential election heralded the start of a new golden age of America’s relations with its longstanding security allies?

Remember how President Biden himself pushed this line with his claim that “America is back” and that Washington would end the supposed Trump practice of denigrating and even rupturing these relationships, and resume its post-World War II strategy of capitalizing on these countries’ strengths and fundamental agreement with vital American interests to advance mutually beneficial goals?

Fast forward to the present, and it’s stunning how thoroughly these American globalist hopes – and the assumptions behind them – have been dashed.

The latest example has been Saudi Arabia’s rejection of Mr. Biden’s request to delay an increase in oil prices announced by Riyadh and other members of the OPEC-Plus petroleum producers cartel. It’s true that few Americans currently view the Saudis as ideal allies. Continuing human rights abuses and especially evidence that its leaders ordered the assassination of a dissident Saudi-American journalist – and coming on top of revelations of Saudi support for the September 11 terrorists and Islamic extremism more broadly – will do that. Indeed, candidate Biden had even promised to make Saudi Arabia as a “pariah.”

But follow-through? Forget it – largely for fear of antagonizing the Saudis precisely because of their huge oil production and reserves, and because the President evidently still viewed them as a key to countering Iran’s hegemonic ambitions in the energy-rich region.

As for Saudi Arabia, it and much closer allies (including in Europe) were far from enthralled with how Mr. Biden pulled U.S. forces out of Afghanistan – which they charge took them by surprise and seemed pretty America First-y.

Under President Biden, the United States appears to have performed better in mustering allied support for helping Ukraine beat back Russia’s invasion. But look beneath the surface, and the European contribution has been unimpressive at best, especially considering that Ukraine is located much closer to the European members of the North Atlantic Treaty Organization (NATO) than is the United States.

In particular, according to Germany’s Kiel Institute for the World Economy, which has been tracking these developments since the war began, to date,

 “The U.S. is now committing nearly twice as much as all EU countries and institutions combined. This is a meagre showing for the bigger European countries, especially since many of their pledges are arriving in Ukraine with long delays. The low volume of new commitments in the summer now appears to be continuing systematically.”

In fact, European foot-dragging has reached the point at which even Mr. Biden’s Treasury Secretary, Janet Yellen, has just told them (in diplospeak of course) to get on the stick.

Apparently, America’s allies in Asia as well as Europe have hesitated to get behind another key initiative as well: Slowing China’s growing technological progress in order to limit its potential militar power.

In a September 16 speech, White House national security advisor Jake Sullivan confirmed that the United States had officially doubled down on this objective:

“On export controls, we have to revisit the longstanding premise of maintaining “relative” advantages over competitors in certain key technologies.  We previously maintained a “sliding scale” approach that said we need to stay only a couple of generations ahead. 

“That is not the strategic environment we are in today. 

“Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”

And on October 7, the United States followed up by announcing the stiffest controls to date on doing business with Chinese tech entities – controls that will apply not only to U.S.-owned companies, but to other countries’ companies that use U.S.-owned firms technology in high tech products they sell and high tech services they provide to China.

Including these foreign-owned businesses in the U.S. sanctions regime – as well as in parallel efforts to rebuild American domestic capacity and marginalize China’s role in these sectors – is unavoidable for the time being, since the domestic economy long ago lost its monopoly and in some cases even its presence in the numerous products vital to semiconductor manufacturing in particular.

But as the Financial Times reported last month, a year after Washington drew up plans to create a “Chip 4” initiative to work with Taiwan, Japan, and South Korea to achieve these goals, “the four countries have yet to finalise plans even for a preliminary meeting.”

The prime foot-dragger has been South Korea, which fears Chinese retaliation that could jeopardize its massive and lucrative trade with the People’s Republic. But the same article makes clear that Japan harbors similar concerns.

Also unenthusiastic about the U.S. campaign is the Dutch manufacturer of semiconductor production equipment ASM Lithography (ASML). ASML’s cooperation is crucial to America’s anti-China ambitions because it’s the sole global supplier of machines essential for making the world’s most advanced microchips.

So far it’s been playing along. But similar complants about possibly losing business opportunities in China – which may account for nearly half of the world’s output of electronics products along with much of its production of less advanced semiconductors – have already persuaded the Biden administration to give some South Korean and Taiwanese microchip manufacturers a one-year exemption from the new export curbs. Could ASML try to win similar leniency?

In fairness, the Biden administration hasn’t wound up placing all its foreign policy bets on alliances and securing multilateral cooperation. Indeed, its new National Security Strategy re-states the importance of rebuilding American economic strength as a foundation of foreign policy success; the legislation it successfully sponsored to bolster the United States’ semiconductor and other high tech capabilities put considerable money behind that approach; and to its credit, it announced the new China tech curbs even after it couldn’t initially secure adequate allied cooperation – assuming, correctly, that an act of U.S. leadership could bring start bringing them in line.

Hopefully, a combination of these rifts with allies and its recognition of the importance of maintaining and augmenting national power mean that President Biden at least is learning a crucial lesson: that supporting multilateralism and alliances can’t be ends of a sensible U.S. foreign policy in and of themselves. They can only be means to ends. And although they can obviously be valuable in many instances, the best ultimate guarantor of the nation’s security, independence, and prosperity are its own devices.       

Our So-Called Foreign Policy: U.S. Ukraine Policy Dangerously Flunks the Logic Test

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alliances, deterrence, Nancy Pelosi, NATO, North Atlantic treaty Organization, nuclear weapons, Our So-Called Foreign Policy, Russia, Ukraine, Ukraine War, vital interests, Vladimir Putin

There must be some kind of psychic connection between my good buddy Ace (so nicknamed because he’s actually flown in U.S. Air Force fighters), and Nancy Pelosi.

Just the other day, he made what I thought was the genuine genius point that the most important question surrounding U.S. policy toward Ukraine is one that’s never, ever, been asked: If Ukraine has indeed become a vital interest of the United States (a category into which, as I’ve repeatedly stated, e.g. here, it was never placed even during the depths of the Cold War), why wasn’t it admitted into the North Atlantic Treaty Organization (NATO) long ago? Even stranger, why the continuing NATO cold feet of so many U.S. leaders who are so fond of claiming the vital importance of ensuring Ukraine’s success?

And hot on the heels of Ace’s questions, the House Speaker on Friday declined to endorse Ukraine’s request not just for inclusion in the decades-old Atlantic alliance, but for “accelerated accession” that would speed up a process that’s normally pretty complicated in normal times.

Yes, that’s the same Speaker Pelosi who had previously sounded pretty adamant about the need to stand with Ukraine “until the fight is done” because its fight for freedom ”is a fight for everyone.”

But as pointed out in the same news report that quoted Pelosi’s more temperate later remarks, even though these are anything but normal times in Europe, there’s no shortage of reasonable-sounding reasons for continuing caution. Specifically:

“The West fears that Ukraine’s immediate entry into NATO — which requires the unanimous approval of all 30 member-nations — would put the U.S. and Russia at war due to Moscow’s invasion of Ukraine as well as its forced annexations announced Friday.”

I wrote “reasonable-sounding, ”however, very deliberately. Because if you give the matter even a little serious thought (as Ace has), it becomes clear that such rationales make no sense at all.

In the first place, even though Ukraine remains outside NATO, the Western aid that’s helped Kyiv’s forces resist Russia so effectively has created a powder keg situation in Ukraine’s neighborhood (by stationing large numbers of U.S. troops right next door) that could all too easily ignite war between the two aforementioned nuclear superpowers anyway.

It’s true that the decision of the United States and Ukraine’s other allies to combine these deployments with hemming and hawing on NATO membership has so far produced a favorable outcome: Moscow’s been frustrated without nuclear weapons being used, much less a world-wide conflagration resulting.

At the same time, this needle-threading act could fail at any minute – which surely explains President Biden’s oft-stated declarations from the get-go that U.S. troops will not be sent into combat in Ukraine. He’s obviously determined minimize that dreadful possibility.

But all this prudence becomes completely inexplicable – at least if you value coherent thought – upon remembering what the word “vital” means in this instance. It’s describing an objective so important (Ukraine’s survival in its current form) that failure to achieve it would (at least at some point down the line) end America’s very existence, either as a physical entity or as an independent country. Even those who aren’t literalists presumably fear that failure to protect a vital interest will leave the United States only the most nightmarish shell of its present self.

To their credit, U.S. leaders who spearheaded the creation of the nation’s major alliances and supported their maintenance have put the country’s money where its mouth is. They have not only promised to use nuclear weapons against nuclear-armed adversaries to protect alliance members whose security is seen as vital. As I’ve often explained (e.g., here), they’ve deployed U.S. forces in “tripwire” configurations aimed at practically forcing Washington to push the fatal buttons and risk America’s nuclear destruction if non-nuclear defenses crumble.

Those policies have aimed above all to deter aggression, and despite the apocalyptic dangers they’ve raised, have been eminently sensible because a thoroughly respectable case ca be made, based on specific, concrete considerations, for the paramount importance of these allies.

For example, it is wholly plausible that the subjugation by hostile powers of places like Germany and Japan and Taiwan could produce intolerable consequences for the United States. In particular, each of those countries possesses technological and industrial prowess and assets that a country like China or Russia could harness to exercise control over the main dimensions of American life.

The point is not whether you or I personally agree or not. Rather, it’s that such fears are anything but crazy.

By contrast, there’s nothing specific and concrete that Ukraine boasts that I can think of – or, more revealingly, that any of its supposed champions have brought up – that Russia could use to achieve anything like the above results.

And this observation leads directly to the second logically loony flaw in America’s Ukraine policy – the one identified by Ace: If in the minds of U.S. leaders Ukraine actually was so all-fired important to begin with, or became so at some point before the Russian invasion (which the President has just declared must be resisted “unwaveringly”), why wasn’t it admitted to NATO right then and there, complete with the nuclear defense guarantee?

Not that any such move would have guaranteed that Russia would have kept hands off. But given that dictator Vladimir Putin hasn’t yet attacked any NATO members in Ukraine’s immediate vicinity or anywhere else, and that Mr. Biden’s vow throughout the entire crisis that the alliance will defend “every inch” of its members’ territory, surely is one reason why, wouldn’t admitting Ukraine before Moscow moved been a no-brainer?

Instead, the United States and the West have danced around this question for more than thirty years – and counting – practically from the moment Ukraine declared its independence from the collapsing Soviet Union in August, 1991. What’s been the problem during this entire period?

I mean, the place is supposed to be vital! In other such instances, that’s why the United States has even contemplated using nuclear weapons at all. And yet so far, Mr. Biden’s clear bottom line, even during the invasion’s early days, when his own administration assumed Zelensky’s government to be doomed, has been that U.S. forces will stay out as long as the combat stays inside Ukraine. In other words, he’s wavered. And almost inevitably, this position has sent Putin the message that Washington and the West ultimately don’t view that country as worth accepting the risk of national suicide.

So thanks to Ace, it must by now be evident that the United States has long believed that it could secure a vital interest with half measures (never a good habit to fall into) or that America should expose itself to an existential threat on behalf of an interest that’s short of vital.

And the folks who believe in either position are supposed to be the post-Trump adults in the room? And will be in charge of Ukraine strategy and the rest of American foreign policy for at least two more years?

Making News: Back on National Radio Tonight Talking Ukraine Fallout, Inflation, and China

Tags

cost of living, energy prices, food prices, inflation, Lehman moment, Making News, nuclear war, stagflation, Ukraine, Ukraine War

I’m pleased to announce that I’m scheduled to return tonight on the nationally syndicated “Market Wrap with Moe Ansari.” Our scheduled subjects: the possibility I discussed recently that the U.S.’ strong support of Ukraine could trigger the kinds of global calamities it seeks to prevent, whether America’s torrid inflation has peaked, and what’s ahead for China’s increasingly troubled economy.

“Market Wrap” airs weeknights between 8 and 9 PM EST, these segments usually begin midway through the show, and you can listen live on-line here.

As usual, if you can’t tune in, I’ll post a link to the podcast of the inteview as soon as it’s available.

And keep on checking in with RealityChek for news of upcoming media appearances and other developments.

(What’s Left of) Our Economy: More Evidence of Biden-Flation’s Toll

Tags

American Rescue Plan, Biden administration, Covid relief, energy prices, Federal Reserve, food prices, hunger, inflation, monetary policy, progressives, recession, supply chain, Ukraine War, {What's Left of) Our Economy

Left-of-center critics of the Federal Reserve’s inflation-fighting efforts keep insisting that risking recession to tame prices would unnecessarily harm the most vulnerable Americans and their struggling working class counterparts. Instead,  many have claimed that living costs can be cut sufficiently by forcing greedy corporations to charge less through windfall profits taxes, price controls, and the like.

And they’ve bridled in particular at charges that the Biden administration’s American Rescue Plan (ARP) greatly worsened the problem by handing trillions of dollars of CCP Virus relief – and therefore purchasing power – to U.S. consumers well after economic growth had already rebounded strongly and unemployment had already nosedived.

Any development that can engulf the gargantuan American economy, like historically high inflation, almost by definition has many different causes. But anyone doubting the economic overheating role of the ARP should check out the graph below, which is found in this Reuters piece from over the weekend.

The article adds to the evidence that still-towering inflation rates are devastating low-income Americans by super-charging the prices of that most basic of basics: food. But the graph makes clear as can be how the ARP contributed to the problem.

As it shows, prices of food (the darker line) began taking off just about the time that the ARP’s strings-free child tax credit payments started to be sent out (July 15, 2021, to be precise) – and not just to the needy, but to considerably better off households as well. Not so coincidentally, the share of American families with children reporting to U.S. Census Bureau surveys being “sometimes or often” short of food (the lighter line) started taking off soon after. And also noteworthy – these food price rises began many months before Russia’s February, 2022 invasion of Ukraine began playing its own major food inflation role. 

As the article also emphasizes, between 2020 and 2022, “as pandemic restrictions eased, so did the appetite for congress and some states to fund hunger prevention efforts.” But continuing federal purchases for “pantries, schools and indigenous reservations” were needed in the first place largely because food – not to mention other necessities – kept becoming so much more expensive.

The lesson here isn’t that no pandemic assistance should have been provided at all. After all, genuine suffering was widespread in its early phases and no one knew how long they would last. And the Fed’s left-of-center critics are correct that ongoing CCP Virus-related and Ukraine War-related energy supply disruptions have greatly boosted prices recently, too.

But as noted here previously, the supply- and demand-side roots of inflation are very closely related (because businesses can be relied on to continue raising prices as long as they can find enough buyers, and to cut them when customers start balking). Moreover, although in economists’ lingo, some prices are “inelastic” (because they’re for goods and services that are essential enough to prevent purchasing cutbacks even after major price increases), when they rise high enough, they can still foster lower prices for other purchases that are deemed less important.

Therefore anything, like big government checks, that fills consumer pockets will strongly tend to spur inflation sooner or later. So when help does need to be provided, it should be much more precisely focused on relieving genuine privation than pandemic relief was.

Even more important: The inflationary effects of supporting household consumption can be offset – and are best offset – by policies to support more production. When the Fed’s left-of-center critics start addressing defects in that supply side of the economy, rather than trafficking in gimmicks sure to exacerbate them, their complaints about excessive central bank monetary medicine will deserve a much bigger audience. In the process, they’ll be able to deliver lasting assistance to those whose plight they rightly emphasize.