Old Friend Is Off The Rails

As I have noted before, I have an Old Friend (OF) whose opinion I've always respected.  In the prior post I disagreed with OF, sharply.  The latest evidence, though, indicates OF has become a complete Putintute and shill, confirming the fear I voiced in the prior post, that OF had found a couple of new "friends" in the Middle East.

It began a couple of months ago when OF announced a new role, economic and finance commentator on CGTN (Chinese Global Television Network), an international propaganda organ for the CCP and PRC.  This was followed closely by a piece on how the national debt will lead to hyperinflation (Given, if Trump is re-elected, his disastrous economic "policies", which include more tax breaks for oligarchs which would in turn balloon the debt, could well cause a collapse.  But it would take the full shit tsunami that is Trump; the debt alone does not get us there.  OF is effectively rejecting Modern Monetary Theory.  Why?  More on that below.).

Then about a month ago came a comment that really had me scratching my head.  OF started bitching about the effect on the London Stock Exchange of International Organization of Securities Commissions (IOSCO) regulations.  IOSCO is basically there to coordinate among different securities regulators, making legitimate financing easier and illegitimate financing more difficult.  It's well known London has been a hub of money laundering since Tommy Pitt practically invented it during his side hustles from the East India Company over 300 years ago.  And it got worse after Maggoty Trencher.  Until the UK joined IOSCO and had to seriously shore up its enforcement.  Why would OF be against that?  As I've said, I'm afraid OF picked up some new friends in the desert.

Then just last week, things ramped up.  OF started promoting the BRIC (Read: Russian.) position of dedollarization, attacking the US's freezing of Russian assets in response to the invasion of Ukraine, and beating the drum for a recent report from Russia that claimed Putin wants there to be no reserve currencies.  Right.  First, Brazil, Russia, India, and China are in no position to make this happen.  If the US and the West fail, and Putin is quite obviously trying to make that happen, the BRICs won't step in.  Civilization will just collapse.  Second, if you think Bad Vlad does not intend to replace US$ with a currency or basket of currencies he controls, I have some oceanfront property in Yuma, AZ, to sell you.

Sorry OF, but I seriously don't trust what you're saying anymore.

This Looks Like the Opposite of an Opportunity

Saw this today.

First, Whitney didn't predict squat. She "predicted" that Citigroup was in trouble in Fall 2007 a week before Chuck Prince resigned and that Merrill Lynch and Lehman were in trouble two weeks before they collapsed. That's called being Captain Obvious. I started telling people to get out of real estate in December 2005, ratcheted it up in December 2006, and set off flares in April 2007. Where's my genius award?

Second, given the cost of financing and the lack of regulation of buyers, all this opportunity is going to do is going to do is concentrate yet more wealth in the hands of the 1%.

Putin in Dresden

OK, let's see if we can connect a few dots.  We know Bad Vlad was in Dresden in the late 80s (just what his brief was remains an open question).  We know the KGB was running revolutionary groups out of Dresden (Red Army Faction, Baader-Meinhoff, PLFP).  We know the KGB was running out of Dresden rather than Berlin because they thought there were no prying, Western eyes in Dresden (It probably kept the operation away from prying, GRU eyes as well.  And Stasi.  Apparently much of this was done without Stasi's approval or even knowledge.  At the very least, it gave Stasi plausible deniability.).  We know they kept the operation records in Dresden, close to the vest (only summaries going to Berlin and Moscow), and the operations included bombings and assassinations in the West.  We know that in the late 80s a number of KGB officers saw the writing on the wall and started preparing for their personal futures by setting up entities in the West and skimming Soviet money into them.

And we know that in December 1989, Bad Vlad suddenly emerges from behind the curtain in full hero mode.  The Berlin Wall had fallen the month before, and an angry mob that had been busily tearing apart the Dresden Stasi HQ started turning its attention to the nearby KGB HQ.  Putin bluffed the mob into jogging on, protecting the facility (Accounts differ on whether he was brandishing a pistol.  Putin himself has never claimed to have been armed.).

Now we get to the speculative parts.  Just what was Putin doing there?  Actual information is thin on the ground (more on that in a bit).  This lack of information has led the usual suspects to conclude Putin deliberately destroyed the records to hide he was chief of Black Ops at the Dresden station.  Ahem.  People, sometimes a cigar is just a cigar.  Putin's career before and immediately after Dresden does not support this grandiose conspiracy theory.  Bad Vlad was the guy who carried the briefcase for the actual players.  Did he work with the officers who handled the foreign revolutionaries?  Yes.  Was he himself the show runner, or even a show runner.  Let's just call it unlikely and leave it at that.

As to the lack of documents, Putin himself has said he along with everyone else was burning documents as fast as they could, which appears to be true as far as it goes.  There is very little documentation concerning anyone who was operating at the Dresden station.  Most of our information on Dresden comes from three types of sources: 1) KGB associates of various sorts who flipped prior to Putin's being there and so could not have known about Putin's activity; 2) KGB associates of various sorts who are selling memoirs and such; and 3) people who may or may not have been in the revolutionary groups and may or may not have been to Dresden but who are more than willing to talk about it in an effort to rehabilitate themselves.  Little of this information can be corroborated, and even less can stand on its own without corroboration.  Except perhaps for those who just want to attract readers and viewers, as opposed to those trying to parse actual information from fool's gold.

So what happened in Dresden in December 1989-January 1990?  All evidence indicates a massive amount of documents were destroyed.  But suppose that isn't the whole story (Try to contain your shock.).  Suppose an ambitious, reasonably intelligent, and in his mind underappreciated KGB officer saw a number of those documents and didn't see "security risk" but "leverage".  Here were a pile of Soviet officials, including who knows who many KGB officers, with their fingerprints all over "third-party" wet operations in the West.  Officials and officers who were now trying to make nice with the West, even find soft landings there.  Landings that would get a whole lot bumpier if Western authorities learned of their parts in killing Western citizens.

So this KGB officer packages up these gold nuggets, perhaps with the assistance of a couple of close associates, but how to move them?  Certainly not through KGB channels.  Enter Major General Horst Boehm, Stasi chief for the Dresden district and the KGB officer's long-standing local contact.  Unlike Putin, Boehm had been unable to protect Stasi HQ, and it was royally trashed to his chagrin and shame.  It was apparent to Boehm the game was up and he needed friends in other places.  Whatever the KGB officer threw at him, Boehm slurped it up with a big spoon.  So he moved the documents to Destination Unknown on one of Stasi's rapidly crumbling and therefore unsupervised mule trains.  Probably via Rotterdam, but that's experience talking, not evidence.

Corroboration?  None.  You see, in February 1990 Boehm and two of his district chief colleagues became so depressed and ashamed over everything that they "committed suicide".  Am I alleging our KGB officer had them whacked after their services were delivered?  Absolutely not; there's no way he had that kind of pull.  Boehm was terminated with extreme prejudice because, among his efforts to cultivate friends in the West, he devised a plan to leverage his knowledge of the complicity of Dutch and Swedish officials in East Germany's international arms smuggling.  Boehm's two colleagues were probably in on it, but that's fuzzier.  The only question is how anyone with sufficient muscle to hit three secure targets in an East Germany still crawling with Soviet military and security forces found out about Boehm's plan.

His documents secured and Dresden station being cooked, our KGB officer is transferred to Leningrad.  From there he blackmails his way up the ladder, builds a coterie of cronies around him, and takes command.  And becomes filthy rich in the process.

The interesting question before us now is, "What has changed?"  Why is Putin no longer concerned about burning down whole wings of the house, ranging from foreign relations to former friends?  I figure the options are as follows, and they aren't mutually exclusive: 1) He figures he's so powerful he no longer has to rely on the Dresden docs; 2) He figures he's so powerful the gang he built around himself using the Dresden docs is expendable; 3) The people who could have been threatened by the Dresden docs are now all gone, the docs are now irrelevant, and any part of his power still based on those docs needs shifted.  I recommend that intelligence agencies focus on researching those points.

Russia 24.06.2023, Noon, What We Know

1) Yesterday Prigozhin said he was fed up with the Russian Army attacking Wagner Group and intended to overthrow the Ministry of Defense. FSB announced what must actually have been going on for several months, namely a criminal investigation of Prigozhian.

2) Last night Putin gave FSB free rein to deal with Prigozhian. Putin then flew out of Moscow. The destination was ostensibly St. Petersburg, but the flight turned off all tracking on takeoff and undoubtedly went to Valdai. That Putin flew rather than taking the armored train on his private rail line would indicate a certain urgency.

3) Earlier today Wagner Group captured Rostov-on-Don and headed up the M4 for Moscow, meeting little resistance. Wagner Group has since captured Voronezh. At least one of Wagner Group's original positions yesterday was adjacent to a GU battalion, but the GU did not interdict.
4) While Wagner Group has supplies and anti-aircraft weapons, it does not have air or logistical support. From this it is reasonable to conclude Wagner Group must attain quick successes with resulting defections and civil unrest.

5) Yesterday a possible propaganda campaign for Prigozhian may have been to claim he was trying to remove the incompetent and criminal generals so Russia could have an honorable peace. With Putin having acted, Prigozhian must aim higher, perhaps manipulating those generals to state publicly they were only following orders that came directly from the top of the government. This might undermine the popular image of Putin and his circle.

6) Given FSB's brief from Putin, if Wagner Group reaches Moscow, it must immediately seize FSB headquarters along with the Ministry of Defense.

Update 1300: Prigozhian has agreed to stand Wagner Group down.  One of two things will now happen: A) Wagner Group will be sandbagged; B) Putin will purge the Ministry of Defense and General Staff.  Whichever happens, it will not preclude the other from eventually happening.

Yet More Bank Garbage

Trump and his minions are claiming the recent bank failures were caused because those banks were "woke".  As with everything else having to do with their use of that word 1) it's meaningless, and 2) it's just being thrown out there to provide cover for the accusers' wrongdoings.

Immediately after taking office, Trump took steps to "relieve community banks" from the evils of Dodd-Frank.  SVB was a community bank the way Elim Garak was a plain, simple tailor.  Once again Der Drumpfenfuehrer and the Reich Wing Media are lying.  There is no way they can connect these dots so they have meaning for anyone other than their tin-foil-hat minions.  The actual dots lead straight to Trump.  In standard GOP form, Trump lifted a bunch of Dodd-Frank liquidity regulations for no reason other than "Regulations BAD!"  (If I were to let my more cynical side run, I could say he also did so to facilitate grift by financial executives, but....).  SVB, which had become Deposit and Clearing Central for a number of crypto companies, now had effectively all of its cash reserve requirements removed.  SVB took the newly freed cash and put it with most of its other investments, buying long Treasury bonds (This was actually a fairly prudent move.  Under normal circumstances.).  Then FTX failed, and seismic shock waves moved through the crypto community.  People decided to cash out of crypto, and the crypto companies had to make large withdrawals from their SVB accounts to cover.  So the run wasn't actually on SVB; it was on the cryptos, who then made withdrawals on their accounts.  The problem was SVB didn't have the cash on hand.  It had to raise it, and that meant selling its Treasury bond positions.  Unfortunately, the Fed has been raising interest rates, and when that happens the value of older bonds goes down because they have the older, lower rates.  SVB had to sell its bond positions at a discount, which left it short.  Also unfortunately, much of the rest of its investment positions were loans back to its depositors, and since those loans had been made with the deposits that were now being drawn on, SVB had a liquidity loop going nowhere.   On top of that SVB was going to have to mark these investments to market, and since they had lost value, that meant its assets would have to be written down.  It was teetering on insolvency when DFPI and FDIC walked in.  This doesn't address some the shadier insider moves, nor does it address just how much cash reserve would have been needed to shield SVB from its crypto positions, but Trump's moves definitely let SVB's executives bury it roof-deep in a mud hole.

And So This Is Christmas

I have to admit I'm not a big fan of Christmas Season.  The overwhelming commercialism is bad enough.  We start with a guy who preached continually about the dangers of materialism and celebrate his birthday with an orgy of materialism that props up our entire capitalist system.  Unlike the list of things Alanis Morissette sings about, that actually is ironic.

For me, though, the real nightmare is the music.  Let's skip over the carols.  They're overwhelmingly schlock, and as Bob Rivers in American Comedy Network sang it, "I think I'd rather have you shove a chainsaw in my ear."  But at least they're short and have no pretensions.  I have to note, though, that one of the best of them, "Carol of the Bells", is actually the Ukrainian New Year song "Shchedryk", dating from back when New Year was in Spring.  Then New Year got moved back to January, and some Anglophone got hold of it, wrote new lyrics, and voila it was a Christmas carol.  Just another example of Christmas flopping its bloated carcass all the way across every stage it lands on.

Anyway.  The real disappointment is the classical side, where the worst is held up as the best.  Menotti's worst opera, Drivahl and the Nut Visitors, becomes his only work anyone knows.  I swear if I hear one more audience chuckle nostalgically when "This Is My Box" starts, I'm going to take a flame thrower to the place.  Crutnacker is Tchaikovsky's worst ballet.  I have to admit I have little use for dance, and ballet is definitely dance, but musically...come on.  An evening of Tchaikovsky will give you hyperglycemia, and the Second Act Endless Parade of Horribles is excruciating even by Tchaikovsky Second Act Endless Parade of Horribles standards.

And then there's Handel's worst oratorio, The Mess.  Thirty minutes of material crammed into two-and-a-half hours.  I've performed the thing more times than I care to think, both choir and orchestra.  I'll take orchestra.  At least hiding in there you can use all that down time to do something constructive, like re-reading Война и мир.  Up in the choir you have to just sit there with a pious, enraptured look on your face while you stare into the abyss.

As I do every year, I'll just be glad when it's over.

No, Old Friend, China Is Not Taking Over

I have an Old Friend (OF) who, like everyone else I went to law school with, is smarter than me.  That doesn't mean they're always right and I'm always wrong though.  This is one of those cases.

On 9 December China formally invited the Arab nations to trade oil and gas in yuan on the Shanghai Exchange.  There has been much pearl-clutching about this being the end of the dollar as the world's reserve currency and China taking over, and OF is one of the big clutchers.  "The oil-dollar link is gone, so Bretton Woods II is now gone, and the yuan is about to take the throne."  No.  Just no.

Admittedly OF knows more about the Gulf these days than I do, having been based there for several years recently.  Unfortunately OF also seems to now be "highly influenced" by certain entities in the Gulf.  I know OF was in a bit of a jam, OF went to the Gulf, and OF was no longer in a jam.  I believe there is something of a Professor Quirrell-Voldemort thing going on.  Besides that, I know more about China than OF.  And Russia.  And the general train wreck of 1973-74.

The collapse of Bretton Woods I in 1971 and the rise of Bretton Woods II in 1974 are convenient fairy tales economists like to tell, but that is what they are: fairy tales.  First, saying that Nixon killed Bretton Woods I when he pulled the plug on gold in 1971 (not 1972 OF) is about like saying Paul broke up the Beatles even though John, George, and Ringo had already called it quits.  Johnson recognized in 1967 that there wasn't enough gold to back enough currency to support the global economy (Oddly enough the same problem that pitched the US into a quarter-century of rolling recession from 1875 to the arrival of the first gold shipment from the Alaska-Yukon Rush, the blessed "one ton of gold", but then who says we can be taught.) and started acting on it.  By the time Nixon took office, the London Gold Pool was dead and De Gaulle was getting his petty revenge for not being treated like the Emperor of the World after WW II (As far as I'm concerned, France will owe us for time and eternity for red-baiting our brilliant leaders into taking over its failed recolonization efforts in Indochina.) by blocking domestic exchange of dollars for francs and hording gold at the dollar's expense, which proved once and for all that gold had to go.  All Nixon did in 1971 was code the patient.  Any resulting panic was due to the usual lack of preparation for the inevitable.

Then there is the myth of how the US brutally strong-armed everyone into Bretton Woods II.  It's a popular story in the Middle East now, understandably so in light of the Afghanistan and Iraq wars and US clandestine operations everywhere else in the region, but let's take a look at July 1974, shall we?  We'd just pulled out of Vietnam with our tails between our legs.  We were in our worst recession since the Depression.  The political scene was a mess; Nixon would be gone in a month.  We honestly felt like we'd had our stuffings kicked out.  Granted, we now had a military with nothing to, and we had lots of unemployed people to feed into that machine.  Granted, we were all really pissed off at OPEC because it was now really expensive to drive our 8 mpg Detroit land battleships in a society built around getting in your car just to visit the neighbors.  But we just weren't up for it.  Sure we could have sent in our professional hitters for some wet work, but putting the requisite boots on the ground to occupy and operate the oil fields?  Wasn't gonna happen, and everybody knew it.  Aside from everything else, it would have put "paid" to Kissinger's efforts in China and the Soviet Union.  So no.

OK, so speaking of China, there's something you really need to know: Everything China does that is outward-facing is theater.  Whether it's the economy, the military, the space program, or whatever, it's propaganda with questionable substance behind it.  And China likes using Westerners to shill for it and has gotten really good at recruiting them.  If you want details, here is a good site to go to, run by someone who has been there.  I'll just share a personal anecdote.  Once upon a time, I was on a multi-discipline team China had brought in to advise it on an environmental issue.  In its drive to industrialize, China had turned a number of its rivers into things that made the lower Cuyahoga look like a bubbling, mountain brook.  Yet people were still living by and using the water from these rivers.  China had been receiving heat from international watchdogs and investors, and so they brought in international experts to help it solve the problem.  Over three years we presented several solutions.  All were declared unfeasible by the Chinese authorities.  In reality they were not interested in solving the problem; they were interested only in presenting an outward-facing appearance of trying to solve the problem.  That's the way it works there.  And that's what the latest dog-and-pony show in Riyadh is all about.

For a currency to be used for exchange or as a reserve, it needs a couple of things.  First, it needs to be issued by a sovereign.  The yuan meets that.  (The euro, BTW, doesn't.  Think the EU is sovereign?  When the US wanted to enforce school desegregation, it sent the US Marshals and the 101st Airborne into the Cracker States to do it.  Ask the EU what it would do if Germany or France told it to pound sand.)  Second, it can't be pegged to another currency, because then any exchange would actually be in the peg.  The yuan doesn't meet this.  "But," you say, "Didn't China remove its dollar peg in 2005?"  Yeah, that's what they said they did.  But since then they've held the yuan in such a tight band around the dollar it might as well be pegged to it.  Again, appearance vs. reality.  Again, image.  China can say it is trading in yuan all it wants, but so long as the yuan's value depends on the dollar, the trades are really in dollars.

One last note.  OF remarks the US can do little to intervene in China's plans because Biden has drained the Strategic Petroleum Reserve to reduce domestic prices.  I'm not a fan of Biden, but I think he's actually done a creditably crafty job here.  He has used the Reserve exactly for its stated purpose, cushioning against supply shocks such as the one created by Bad Vlad.  The Reserve has been drawn down significantly, but it certainly hasn't been drained.  And Biden sold at the top of the market and is now resupplying at the current, much lower price.  If Biden were a Republican, I suspect OF would be calling this a genius business move.  At any rate, the current level of the Reserve does not hamper any steps the US may need to take concerning China's plans.  Should any substantive consequences actually materialize from those plans.

Nord Stream Pipelines Sabotage

There has been a lot of silliness bandied about concerning last week's sabotaging of the Nord Stream pipelines off Germany.  First I would note I'm a Norwegian-American and maintain connections in the Old Country; I lived in Germany and maintain connections there; and once upon a time I could read Russian pretty fluently for reasons I shall not go into here other than to say it was the late 70s and early to mid 80s, so go figure it out.

The problem is something Sherlock Holmes warned against repeatedly: People are jumping to conclusions without facts.  I expect this kind of crap from mainstream media.  They have deadlines to meet, and the little problem that they have no idea what they're talking about or their sources are entirely Russian trolls is at best a secondary concern.

For a level-headed analysis of the matter, I recommend you watch Anders Puck Nielsen.  More on this later.

More of a problem than misreporting by mainstream media is that sites that used to be go-to for solid analysis are now shoveling barnstuff with big shovels.  One example is Eurotrib, which I've been on for some time and which used to be a home for a number of significant European policy analysts.  Now it's virtually swamped by drivel from Oui from the Netherlands and Cat from...Planet Claire, two people who know far less about things than they think they do.  On 1 October Oui dumped one of his word salads on this topic, a mishmash of "supporting cites" from legit sources that don't necessarily apply or aren't necessarily consistent (and many of which are 10, 15, or more years old), nonlegit sources such as Kim Dotcom and the Chinese government, and people who used to know better but apparently no longer do such as Pepe Escobar and Yves Smith (nom de plume for Susan Webber).  Oui's conclusion: The US must have done it to stop German activists from reopening the pipelines, and Russia couldn't do it because it would only hurt them.  Ahem.  More on this below.

Speaking of Ms. Webber, she did a dump on her site, Naked Capitalism.  I used to be a regular at NC back in its heyday during the financial crisis, but it has gone steeply downhill since then to the point that the bulk of its writers are there because they have nowhere else, and they don't even write under their real names.  The heavy hitters, such as the MMT scholars like Bill Black, are long gone.  Anyway, Ms. Webber made a blog post supported by such totally legitimate sources as the Chinese government and retired diplomat M.K. Bhadrakumar (most of whose postings were in the USSR/Russia and whose father was a very active member of the Communist Party of India) to conclude the US must have done it.  She actually wrote, "On top of that, the area of the attack was heavily monitored by both Sweden and Denmark, and the Baltic generally is also well surveilled…by NATO members. And as many have pointed out, on top of Russia having at best limited opportunity, it lacks apparent motive."  Impressive, every word in those sentences was wrong.  First, yes NATO surveils the Baltic, and so does Russia.  Second, Russia has tons of opportunities.  Finally, Russia has tons of motive.  More later.

The next day NC doubled down with Conor Gallagher's post.  It takes Russian and Chinese sources at face value (In fairness it quotes Nielsen, but not on a matter that matters.) and then trots out true tinfoil-hattery with John Helmer's allegation that Poland did it on behalf of the US.  Wow.  Just wow.

If you haven't yet, go watch Nielsen's YouTube.  It lays things out really well.  Nielsen starts from the rational position that Russia is losing in the Ukraine.  And that's the crux of the problem.  The people who think the US did it and Russia couldn't have, also think Russia is winning.  The pace of the attack is just Russia biding its time.  The recent withdrawals in the east were completely orderly and strategic.  Russia is about to unleash 300,000 well trained, well equipped, highly motivated troops on Ukraine.  Why would Russia blow up the pipelines when Ukraine is about to be KO'ed, and the EU is about to lift sanctions and buy Russian again?  It's like listening to MAGAts talk about how Trump won the 2020 election.

The truth is that Russia is losing.  Badly.  It was routed out of areas it had just illegally claimed sovereignty over.  Civil unrest is growing.  A quarter-million potential draftees have already fled, with more on the way.  And the ones who will ultimately be sent will be about as effective as the Afghan Army.

Could the US have done it?  Of course.  It certainly had the opportunity and the means.  But did it really have a motive?  US intelligence and the military have made a lot of stupid moves over the last 75 years, but this would have been a whole 'nother smoke.  Supposedly the US blew the pipelines to prevent Germany from reopening them.  This ignores that there were no forces in Germany that could make the government lift the sanctions.  AfD and Die Linke?  Are you kidding me?  So of course, let's risk the progress of the war by blowing up the pipelines, the only inevitable consequence of which will be increased turmoil in Europe.

Further, as Nielsen point out, none of this makes operational sense.  The US could have used a fully clandestine attack, such as a cyber attack planting a seed to be triggered if someone actually did try to lift sanctions.  If it had been a US covert attack, it would have been closer to Vyborg.  It certainly would not have been so close to the Baltic pipeline, and the Poles would never have signed off on it.

Now consider Russia.  Bad Vlad and his rat pack are in a corner, and they know it.  They are losing on the battlefield, so they need to find a way to disrupt the opposition, break it apart, make it want to stop supporting Ukraine.  So perform an act of sabotage, and use the sock puppets to blame the US.  Putin's Ardennes Offensive (Not the Steiner Offensive.  Yet.).  Opportunity and means?  With the Baltic bases right there, definitely.  Motive?  Oh yes.  But the pipelines are Russian!  Well they twarn't usin' 'em none.  Remember, Putin and his people are in trouble.  They need solutions immediately.  They may as well get some return on the pipelines now, because there may be no tomorrow.

And so far, courtesy the sock puppets, the plan is working.  How long it will continue to work only Winter can tell.  But there's one more thing to toss in.  As I mentioned above, Russia surveils the Baltic as well.  Do you really think that, if Russia had spotted a US submarine operating in the sabotage area, it wouldn't have already broadcast it to the world by now?  Yeah, I didn't think so.  Consequently, unless a bunch of evidence rolls in actually implicating the US, I'll view anyone pointing the finger this way as tools and fools.