A major piece of news this week is that Yellow Corporation, the 90 year old fifth largest less-than-truckload (LTL) transport firm in the country has declared Chapter 11 bankruptcy. It and its subsidiaries have ceased operation. Wyatt Grantham-Philips reports at the Associated Press:

NEW YORK (AP) — Trucking company Yellow Corp. has declared bankruptcy after years of financial struggles and growing debt, marking a significant shift for the U.S. transportation industry and shippers nationwide.

The Chapter 11 bankruptcy, which was filed Sunday, comes just three years after Yellow received $700 million in pandemic-era loans from the federal government. While a Chapter 11 filing is used to restructure debt while operations continue, Yellow, like other trucking companies in recent years, will liquidate and the U.S. will join other creditors unlikely to recover funds extended to the company.

Yellow fell into severe financial stress after a long stretch of poor management and strategic decisions dating back decades.

For me the question is why? Obviously, it’s not because people aren’t shipping anything any more and I doubt it’s because of competition from, say, Amazon. Amazon is a customer of YTC’s. Clearly, the company was mismanaged but how?

Corporate management blames their problems on the Teamsters and there may be kernel of truth in that but I doubt it’s the whole story. As might be expected at Vox.com Whizy Kim remarks:

Labor has long been a major presence in the logistics industry — there are about 340,000 union UPS workers, for example — but unionized drivers and dock workers have become less common since the deregulation of the trucking industry in the 1980s. “There’s a lot more competition now,” says Patel — competition that often uses cheaper, non-union labor. Yellow, like many others in the sector, had failed to be “nimble,” Patel adds. “Time has caught up with this company, and the financials have caught up with this company.”

I can’t help but notice that Yellow went on a sort of buying spree about 20 years ago and has been on shaky ground ever since. Did rising interest rates doom Yellow?

Kendara’s What a Character, our beloved Kara, has died. The IBD that has plagued her all of her life has finally been too much. She had stopped eating a week or so ago. We took her into animal emergency care two days ago and, since she was actually deteriorating, we made the determination to end her suffering today.

I probably loved Kara more than any dog we have ever had (except possibly our first)—she needed me the most. I will miss her.

This report from Fortune lists the nine countries that continue to have AAA credit ratings after Fitch’s downgrading of U. S. sovereign debt:

Economies with the highest credit rating at S&P Global Ratings, Fitch and Moody’s Investors Service include Germany, Denmark, Netherlands, Sweden, Norway, Switzerland, Luxembourg, Singapore and Australia. Canada is rated AAA by two of the ratings companies.

Rather than producing a table of the military expenditures of those countries, I’ll just ask a question. What would the credit ratings of those countries be if they were spending 2% of their GDP or more on military spending? I’m guessing it would change their entire economies substantially. We spend more than those countries as a percent of GDP, per capita, and in dollars. That influences our whole economy.

George Friedman assesses the status of the war between Russia and Ukraine. Following the Wagner Group’s march towards Moscow, whatever the heck that was:

Two things became unlikely: that Russia would destroy the Ukrainian army and occupy Ukraine, and that Ukraine’s army would drive Russia out of Ukraine. The only logical step is a negotiated settlement. The question is what that settlement might consist of. The only logical settlement – on the surface, at least – is a division of Ukraine. One option might be that Donbas, full of ethnic Russians and on Russia’s border, is ceded to Moscow. But Ukraine cannot cede more – or even this – because it reasonably doesn’t trust the Russians not to base a force there and attack again in the future. The Russians will have a great deal of trouble accepting this. They have lost much in the war, and returning with only Donbas would be an insult to the dead and devastating to Putin. Ukraine must have a militarily defensible boundary and a shallow concession. Russia must validate the claim that it is a great power and can settle for far more than Ukraine can concede. Each side must make a powerful move to convince the other that a bad compromise is better than defeat.

Not everyone sees it that way. For example, Peter Juul sees the U. S. war aims as:

1. Complete Russian withdrawal from Ukraine’s internationally recognized territory—including Crimea and territories seized by Russia since 2014. Russia renounces any and all claims to Ukrainian territory within its internationally recognized borders as part of an agreement formally ending hostilities.
2. As part of an agreement formally ending hostilities, Russia formally and explicitly recognizes and reaffirms Ukraine’s freedom to choose its own alliances and geopolitical alignments—explicitly including potential Ukrainian membership in NATO and the European Union.
3. A de-militarized zone is created along the Ukrainian-Russian border, overseen by the Organization for Security and Cooperation in Europe. The precise parameters of this zone should be cleared with Kyiv before the publication of any American war aims document.
4. The full, immediate, and unconditional release and return of all Ukrainians now held by or deported to Russia, including prisoners of war, civilians, and the more than 700,000 Ukrainian children Russia has abducted from Ukraine.
5. The United Nations, European Union, or some other credible multinational organization establishes a special war crimes tribunal for Ukraine to investigate and try Russian war criminals.
6. Russia ceases its threats against the territorial integrity and political independence of all OSCE member nations—in particular Baltic and Eastern European states—in accordance with its obligations under the Charter of the United Nations.
7. Removal of all Russian nuclear weapons from Belarus. Russia refrains from implicit and explicit threats of nuclear weapons use and nuclear war. Nuclear arms control talks including but not limited to Russia and the United States recommence at the earliest possible date.
8. The United States, the European Union, and Turkey guarantee the free flow of Ukrainian grain and other agricultural products via the Black Sea. Russia formally pledges not to interfere with Ukrainian agricultural exports.
9. The reduction and removal of certain sanctions against Russia, not including those on military equipment, goods, and technology or on Russian energy exports.
10. A certain portion of Russian frozen financial assets will be seized or surrendered to help pay for reconstruction of Ukraine. The exact details of this point should be negotiated with relevant European allies and cleared with Kyiv.

Since the U. S. does not have the ability to supply the Ukrainians I have no idea how the United States would achieve those goals short of direct intervention of U. S. forces in the war, something President Biden has categorically rejected.

Mr. Friedman goes on to describe how he sees Russia’s actions but I think his explanation is far too complicated and he’s ignoring something. The simplest possible explanation of Russia’s actions is that John Mearsheimer was right: Russia plans to “wreck Ukraine”. Putin doesn’t want to occupy it, at least not all of it, but to wreck it.

Update

Another precinct heard from. Here’s Dominick Sansone at The National Interest:

The issue at the center of the disagreement is that the respondents do not believe that such an end can be reached unless it proceeds from total Ukrainian victory and the destruction of the current Russian regime. The reason for this is presented as a matter of fact: Russia can simply no longer be treated as a real nation-state. As articulated by Stent, any negotiation with Moscow is impossible because they are liars, and an armistice will inevitably be a “temporary solution while Russia regroups and plans its next attack.” Such a conclusion obviously leads the international community to an impasse in which the only way out is through.

I have no idea how the outcome (the end of Russia) can be accomplished. He concludes:

Unfortunately, this seems to be the mindset of not only those experts and diplomats responding to Charap’s sensible argument, but the Western foreign policy establishment more broadly.

Last week I spent the entire week in my new employer’s office in Eastern Pennsylvania. Mighty purty country. I was busy—including travel time I put in 60-70 hours last week and, as you might anticipate, I’m a bit tired.

As is my usual practice I took a little time to

1. Check out local restaurants. I prefer to avoid chains. I think I identified all of the restaurants worth eating in within 5 miles of the office.
2. Do a little antiquing. Pictured above is my splurge. I paid 50¢ for the wineglass displayed above. Based on the style, manufacture, and composition I estimate it’s around 150 years old. Even with a few small chips on the base it was a good buy.

Now I’m back and trying to get back into the swing of things.

I found the Wall Street Journal’s editors’ assessment of the latest developments in the matter of Hunter Biden fairly mild under the circumstances:

All of this underscores Joe Biden’s horrendous judgment in blending his son’s business with his duties as Vice President. Mr. Biden was the Obama Administration’s point man for Ukraine, which was fighting Russia’s first invasion, and he can’t claim ignorance about his son’s dealings.

and

Whether or not Joe Biden took a dime from these dealings, this is a form of political corruption. Covered up by the press in 2020, it will be an issue in 2024.

I think we should all agree that:

1. The Biden family has been engaging in influence-peddling
2. Although influence-peddling is not illegal per se it is a corrupt practice
3. It’s a problem

Are those fair assessments? I’m not certain how the problem can be remediated. IMO the best way is term limits but that has proven quite difficult to put in place and will only limit the problem not prevent it.

As an Illinoisan all of this is very familiar to me. We’ve been trying to clean house here for nearly 50 years. The tendrils of corruption just go deeper and deeper.

In an op-ed in the Wall Street Journal former World Bank President David Malpass says that Fitch’s downgrading of U. S. debt should serve as a wake-up call:

The essence of Fitch Ratings’ Tuesday decision to downgrade U.S. Treasury debt: We’re experiencing a slow-motion fiscal train wreck, not a “soft landing,” and it’s draining global capital and endangering the dollar.

concluding:

The downgrade is a clarion call to rethink fiscal, monetary and regulatory policies. With Europe, Japan and China nearly stagnant, the most important swing factor in the global growth outlook is U.S. private-sector innovation. To reach its potential, that ingredient can no longer be stalled by regulatory mandates and government’s passion to grow and pick winners and—mostly—losers.

I found this observation interesting:

The Federal Reserve has been silent about the conflict between its mandate to provide price stability and the continuing fiscal blowout. Its more than $7 trillion in bonds support Washington’s deficit spending by holding down bond yields, blurring the line between fiscal and monetary policy. The New York Fed’s April Open Market Operations report describes a plan to buy trillions more in U.S. government bonds, apparently without regard to the issuer’s fiscal policies or bond rating.

This undercuts the central bank’s independence by exposing it to losses when interest rates rise. It also undercuts growth, considering the Fed will have to continue funding its bond portfolio with interest-paying debt. The central bank currently borrows $3.2 trillion from banks and $2.1 trillion in reverse repos from money-market funds, on which it pays 5.4% and 5.3% in interest, respectively. That creates economic inequality by forcing the necessary savings for short-term floating-rate working-capital borrowers—the heart of private-sector dynamism—into long-term bonds. The crowding out has harmed median income growth since the Fed started building its permanent government portfolio in 2010.

Rather than sound the alarm over this fiscal drain, regulators have protected the status quo. Their power has ballooned since the days of the “Greenspan put” in the 2000s, when Wall Street expected the central bank to pause or cut interest rates to protect stock-market valuations. The Fed can now do much more: by buying huge amounts of bonds, mortgages and repos outright and paying top interest rates to U.S. and foreign banks and money-market funds. The regulators can also back large depositors after bank failures, as they did with Silicon Valley Bank in March. These powers risk moral hazard—and each payment comes at taxpayers’ expense without the accountability of Congress’s appropriations process.

The Federal Reserve’s dereliction of its responsibilities didn’t start when Joe Biden was inaugurated president. If the Fed had acted earlier inflation might not have gotten so high so fast. Scott Sumner has written on that subject extensively. The Federal Reserve governors have acquired a very bad habit of trying to “run the economy” over the last 30 years or so. The problem is that the only way they or executive branch regulators can “run the economy” is, to use Mr. Malpass’s diction, impel the U. S. economy to operate below its potential.

I seriously doubt that anything will come of this “wake-up call”. The incentives of all of those who might take action point in the direction of inaction. And they won’t change those incentives themselves. Change would need to be forced on them.

The editors of the Wall Street Journal quote Fitch Ratings on their downgrade of the U. S. credit rating from AAA to AA+:

“The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions,” Fitch said in explaining its decision.

concluding:

The reason U.S. debt hasn’t been downgraded earlier and more often is because the dollar remains the world’s reserve currency. But that “exorbitant privilege,” as the French like to call it, is not a birthright. It can vanish in a flash if markets perceive a broader American decline in governance or its ability to meet its financial obligations.

This is where political leadership matters, and where it has failed. The White House criticized Fitch’s decision, but there’s a reason the downgrade happened on Mr. Biden’s watch. It’s a no-confidence vote in U.S. political leaders, and that starts at the top.

There’s a lot to criticize. I don’t think that the rating agencies should exist at all in their present form and they certainly shouldn’t be anointed as at present. That is a license to steal. Of course the administration will complain about it.

However, let’s go to the numbers. Consider:

and

I could draw the trend lines but I’ll just say what I see. The trend on federal tax receipts has either been flat or declined over a very long period (when you subtract the noise) while the trend on federal outlays has risen over almost as long a period.

Clearly, something gotta give. The U. S. credit rating is where that dichotomy is landing.

I have criticized every cut in the personal income taxes over the last 20 years. I don’t believe this is a partisan failing other than Republicans always want to cut taxes while Democrats always want to increase spending. As noted in comments recently nothing is likely to change until there’s a crisis.

Keep in mind Hemingway’s notable observation about how bankruptcy happens: gradually then suddenly. The worst time to attempt remediation is during a crisis. But it’s easier politically.

Given recent events in Chicago, I think it appropriate to reflect on why governments exist. The primary purpose of government is to preserve public safety and order. Mayor Johnson seems to have lost track of that. Governments are not primarily jobs programs, methods of housing and feeding migrants, or ways of picking winners and losers. All of those can be done in other ways but only government is authorized to preserve public safety and order.

By far the best way to inculcate good behavior in young people is to instill consciences in them. They should do the right thing because it is the right thing. If they don’t have consciences, young offenders need to be restrained. That isn’t “demonizing” them, as Mayor Johnson likes to put it. It’s acknowledging reality and the first responsibility of government.