The editors of The Economist are highly critical of President Biden’s trip to the Middle East, characterizing it as “aimless”:

For decades American presidents have arrived in the Holy Land like earnest pilgrims searching for the holy grail of a two-state solution. George Bush hoped to find it in 2003 with his “road map for peace”. Barack Obama came in 2013, while John Kerry, his secretary of state, was trying to restart Israeli-Palestinian talks. Even Donald Trump promised to “give it an absolute go”.

Joe Biden has lost the faith. His nearly 48-hour visit to Israel and Palestine, which begins on July 13th, will be an exercise in banality: shake a few hands, see a few sights, head back to the airport. He is unlikely to announce big plans or offer stirring words. No president in recent memory has arrived with so little to say about the region’s most intractable conflict.

Then it’s off to Saudi Arabia!

Even now, the president insists he is not going to Jeddah, the Saudis’ commercial capital, to meet Prince Muhammad. Instead he is going to attend a broader meeting with leaders of six Gulf countries, plus Egypt, Iraq and Jordan. If the de facto ruler of Saudi Arabia should happen by a diplomatic summit in Saudi Arabia, perhaps he will say hello. This is comical spin; that Mr Biden feels he must offer it shows how controversial the trip is among Democrats.

It would be less controversial if it offered the promise of real achievements. It does not. Israeli officials play down talk of a breakthrough with Saudi Arabia, with good reason. The kingdom is in no rush to make a deal. It will settle for incremental steps: Mr Biden is expected to announce in Jeddah that more Israeli airliners will be allowed to fly over Saudi airspace. On oil, even if the Saudis agree to pump more, it is unclear how long they can run fields at full tilt, and whether the world has enough refining capacity to turn extra crude into fuel that can be gobbled up.

I think they’re being a bit harsh but their key observation remains: why is President Biden visiting the Middle East? To beg for more oil? That doesn’t make any sense. Since the Abraham Accords the urgency of Middle East peace is much diminished so the typical reason that presidents have visited the Middle East doesn’t apply, either. The visit can’t be for domestic consumption since Americans are disinterested in foreign policy at best and much more concerned about domestic concerns now so that doesn’t make any sense.

It’s mysterious.

Update

Foreign Policy’s Colm Quinn has a slightly more charitable take on the trip:

By visiting Israel before Saudi Arabia, he avoids the snub of his Democratic predecessor Barack Obama, who rankled Israelis by traveling to Egypt for his first Middle East trip and skipped Israel altogether.

With Israel ruled by a caretaker government following the collapse of its multi-party coalition last month, the visit is a chance for interim Prime Minister Yair Lapid to audition for the full-time role.

Biden is handing Lapid a diplomatic lay-up by participating in a signing ceremony as part of the trip. On Thursday, the two men are set to put their signatures to “The Jerusalem Declaration”—a framework for relations that will include a statement that neither country will allow Iran to acquire a nuclear weapon.

with this about the Saudi visit:

In a weekend Washington Post op-ed, Biden gave his reasons for traveling. Biden said he was going to the Middle East “to start a new and more promising chapter of America’s engagement” and promote the “diplomacy and cooperation” that he said ultimately prevents violent extremism from attacking Americans on U.S. soil.

At Bloomberg via the Washington Post Marcus Ashworth takes note of the declining value of the euro:

The euro’s weakness is fast becoming a problem for the European Central Bank as its decline drives it below parity to the dollar. While that threshold may just be a number, it is undeniably more than symbolic: Its breach will affect confidence in the euro zone and, for once, is driven as much by concern about Europe’s economic outlook as it is by investors seeking the haven of the greenback. The central bank needs to respond with a bigger-than-planned rate increase later this month.

The currency’s drop ought to persuade the ECB to raise official borrowing costs faster than it is currently anticipating, narrowing the interest-rate differential to other major global currencies. The Federal Reserve has raised rates by 150 basis points this year and is poised for much more tightening; more than 50 countries have raised official rates this year by at least 50 basis points. The ECB has yet to act, with its official deposit rate still negative, making it very late to the tightening party — what could turn out to have been a serious policy mistake. The euro is weaker this month versus all of the world’s major currencies.

Yesterday the euro reached parity with the dollar for the first time in 20 years. It is expected to decline farther in value.

As I’ve mentioned before, I was working in Germany when Germany’s currency was still the Deutsche Mark and adopting the euro as the common currency of the European Union was a hot topic. It was conceived of then and always has been as an attack vehicle against the dollar. It now has a greater opportunity to serve that function than at any time in the recent past. We’ll see how that works out.

Catherine Rampell uses her Washington Post column to tell us that politicians are acting like politicians:

PITTSFIELD, Mass. — There’s not a ton that most politicians can do to push inflation down. The few, limited tools they have available might carry some political risk. So maybe it’s unreasonable to expect them to try, and perhaps pundits like me should stop fussing.

But can we at least agree that politicians shouldn’t do things that will make inflation worse?

So far that reminds me of an anecdote I’ve mentioned before. Back when I took Econ 101 the professor sadly declaimed that we don’t know how to produce prosperity but we do know how to create shortages. Not a great deal has changed since then.

Some of what Ms. Rampell says in her column is a consequence of confusing price increases with inflation (they aren’t the same thing) but, since today we have both price increases and inflation, a consequence of political malpractice, perhaps I should cut her some slack.

And we shouldn’t be surprised at the political malpractice, either. Not only are they falling victim to the politician’s fallacy when you’ve spent 50 years calling the benefits paid out by the government either “stimulus” or “investment” when by and large they’re neither we should not be at all surprised that they keep doing what they’ve done for those 50 years.

Instead of stewing about that let’s consider how politicians could avoid making things worse. Here are my suggestions:

• Don’t pay out any additional benefits that aren’t offset by additional revenue. Hypothetical and unlikely revenue doesn’t count. Real benefits should be balanced in the near term by real revenue.
• Stop creating uncertainty. Stop talking about tax increases, reducing our production of oil and gas, and anything else that you know you’re not going to follow through with.
• Limit the asylum-seekers we accept to those we’ve invited in rather than accepting anyone who shows up at our southern border as an asylum-seeker. We already have at least 1% more people in the country than otherwise have been the case. That means increased demand which, in the absence of increased production, means higher prices.

Does anyone have any other suggestions?

I wanted to remark on the observations of economics and business columnist Peter Coy in the New York Times. Noting that the number of people employed is rising while productivity declines he remarks:

In June, the number of people on nonfarm payrolls in the United States increased by 372,000, more than expected. More jobs, more income — that’s positive. Many economists took the Bureau of Labor Statistics report as evidence that the economy is nowhere near tipping into a recession. “An American economy in free fall does not tend to produce 372,000 jobs in any given month,” Joe Brusuelas, the chief economist of the accounting firm RSM, wrote in a note to clients.

What’s not so good is that the economy seems to require so many more workers at a time when its output is actually shrinking. Output of goods and services fell at an annual rate of 1.6 percent in the first quarter of 2022, and it probably fell at a 1.2 percent rate in the just-ended second quarter, according to the G.D.P. tracker of the Federal Reserve Bank of Atlanta.

More people producing less is not a good look, no matter how you squint. Labor productivity — that’s output per hour of work — shrank at an annual rate of 7.3 percent in the first quarter in the nonfarm business sector. Given what we know about jobs and output, productivity probably shrank again, though less, in the second quarter.

Here’s his explanation:

It’s clear now, though, that most of the increase was from a change in the mix of workers. Huge layoffs in leisure, hospitality and other low-wage sectors early in the pandemic skewed the labor force toward workers who earn higher wages and tend to have higher labor productivity (at least as conventionally measured).

The temporary skew in the average skill level of jobs accounted for 71 percent of labor productivity growth in the second quarter of 2020, according to research by Jay Stewart, a senior research economist for the Bureau of Labor Statistics.

Now that all those low-wage workers are coming back, it makes sense that productivity growth would slow down or turn negative.

There’s just one problem with that. It didn’t happen. Here is the St. Louis Federal Reserve’s reportage on non-farm productivity:

Where’s the increase in productivity? What I see is a very noisy curve with periods during which productivity increases, e.g. 1993 – 2000 and 2011 – 2021and periods during which it decreases, e.g. 1983 – 1991 and 2001 – 2008. We may be in a period of decreasing productivity now. It’s too soon to tell. To my eye the broad trend appears down.

Mr. Coy has no explanation for that and I’m open to one. I suspect that long period of increasing business investment produce increasing productivity while decreasing returns to scale, offshoring, and immigration result in decreasing productivity but those are only suspicions. As noted I’m open to an explanation.

In his latest New York Times column Tom Friedman combines realism and fantasy about Russia’s war in Ukraine. Here’s the realism:

I believe the Ukraine war is about to enter a new phase, based on this fact: Many Russian soldiers and generals may be dead, but Ukraine’s steadfast NATO allies are tired. This war has already contributed to a huge spike in natural gas, gasoline and food prices in Europe — and if it drags into the winter, many families in the European Union may have to choose between heating and eating.

As a result, I think the war’s new phase is what I call Vladimir Putin’s “winter strategy” versus NATO’s “summer strategy.”

It is obvious that Putin is ready to keep plowing forward in Ukraine, in the hopes that the soaring inflation in energy and food prices in Europe will eventually fracture the NATO alliance. His bet seems to be: If average temperatures in Europe are colder than normal, and if average global oil and gas supplies are tighter than normal, and if average prices are higher than normal, and if electricity blackouts from energy shortages become widespread, there’s a good chance that European NATO members will start pressuring Ukraine President Volodymyr Zelensky to cut a deal with Russia — any deal — to stop the fighting.

So Putin must surely be telling his own exhausted troops and generals: “Just get me to Christmas. Winter is our friend.”

and here’s the fantasy:

There is only one thing that I am certain of: This war in Ukraine will not end — really end — as long as Putin is in power in Moscow. That is not a call to overthrow him. That’s for Russians to decide. It’s simply an observation that this has always been Putin’s war. He personally conceived it, planned it, directed it and justified it. It is impossible for him to imagine Russia as a great power without Ukraine. So, while it may be possible to force Putin into a cease-fire, I doubt it will be more than temporary.

In short: This Ukraine war is so far from over that I can’t even see over.

What makes it fantastical is that he imagines that Putin is isolated in Russia and that all that is necessary to bring peace between Russia and Ukraine is for someone, anyone to replace Putin as Russia’s leader. That’s a fantasy. Even with the high casualties in men and equipment in Ukraine, Putin’s approval rating is around 75%. That’s real. The things he says and does are just carrying out what many Russians believe.

There are only two ways that wars end. One or both parties can be destroyed, exhausted. Or there can be a negotiated settlement. The likelihood that any negotiated settlement will result in Ukraine becoming a member of NATO is extremely remote. And Russia has not been destroyed and is not nearing exhaustion. Indeed, since European countries have continued to import Russian oil and gas, the prices of which have risen sharply, it’s arguable that Russia has actually benefited since February. Our European NATO allies have announced that they will stop importing oil and gas from Russia. We’ll see.

IMO we should start thinking about the relationship between Russia and Ukraine more like that between the United States and Mexico. We’re neighbors but we’re not friends. If you think that the two countries are friends you have not been paying attention. Our leaders may smile but there are certain things that Mexico’s political leaders understand that they can’t do. For example, they can’t install Chinese weapons on the U. S.-Mexico border.

Although I agree with his fundamental premise, I disagree with Graeme Dobell’s conclusion in this piece at The Strategist. The fundamental premise is that the importance of Asia is rising. The conclusion is that NATO should extend its operations into Asia.

Even a world stepping back from peak globalisation won’t slow an Indo-Pacific reality that’s turned from long-term trend to today’s fact. The power balance will be set in the place where most of the world’s people live and where most of the world’s wealth will be created.

The West will matter greatly in determining the central balance that’ll be defined in the Indo-Pacific. But as in much else, no longer will the West dominate.

The message of last month’s NATO summit was that the security of Europe and the security of Asia are joined; that’s why the leaders of Australia, Japan, New Zealand and South Korea attended.

I would put it this way. The United States has direct national interests in Europe, particularly Western Europe. Our interests in Eastern Europe are somewhat indirect. The United States has direct national interest in Asia, particularly in Japan, South Korea, and Philippines and to some degree Taiwan. We also have interests in Australia and New Zealand. Our national interest in China is, honestly, discretionary. We’ve chosen to have interests in China.

Given our Atlantic and Pacific interests we have a more general interest in maintaining freedom of maritime commerce.

The United Kingdom has interests in Europe, to a lesser extent in Eastern Europe, and in Australia and New Zealand. Its interests in China are discretionary. Our other NATO allies’ interests in China are discretionary.

In recognition of the different national interests of its members, perhaps a division of labor is in order. The interest of our European allies in European wars is necessarily greater than ours. They should be prepared to wage them and take the greater part of the responsibility for doing so. We, on the other hand, have greater interests in Asia than they and should be prepared for that. We should also cultivate relations with our Asian allies, encouraging them to undertake responsibility for their own defense.

Such a division of labor would certainly beat the heck out of the U. S.’s being prepared to defend everybody everywhere. The more responsibility we take in European wars the less predisposed our allies are to undertake that responsibility and similarly with our Asian allies.

While “Ag Metal Miner” takes note of another problem I’ve been pointing out for some time in a post at OilPrice:

One of the main factors hamstringing global auto supply is the ongoing semiconductor shortage. Unfortunately, hopes of seeing any relief in this area were dashed yet again at the World Economic Forum this Spring. There, Intel CEO Pat Gelsinger stated that supply problems would most likely continue into at least 2023. He subsequently admitted that 2024 would be more likely.

As with most other commodities, the shortage of microchips is a multifaceted problem. During the pandemic, home electronic sales went through the roof. However, factories were also forced to slow production or shut down entirely. As the Law of Supply and Demand reared its familiar head, it wasn’t long before shortages, and price increases became the norm.

Then came the invasion of Ukraine. This drastically affected the supply of neon gas, which is essential to the conductor market. Russia, on the other hand, supplies between 25% and 30% of palladium, another semiconductor necessity. As sanctions on the country began to roll out, the palladium did the opposite.

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By and large we don’t produce either those consumer electronics or the semiconductors necessary to make them here. Most are imported from China, Taiwan, Japan, and South Korea. It’s not just semiconductors and neon that are in short supply:

The takeaway: more and more people want off gasoline. And whether they go into the future happily or begrudgingly, they are going nonetheless. This means a lot for metals commodities, especially battery-related minerals like lithium, cobalt, and nickel. It means a lot for battery companies, who are pressured by the market to produce newer, better, and more effective products.

The top producers of lithium are (in descending order): Australia, Chile, China, and Argentina. The top producers of cobalt are: Democratic Republic of Congo, Russia, Australia, Philippines, Cuba, and Canada with DRC producing more than all other producers combined. We have substantial known reserves of lithium here and know how to produce it from seawater. We just choose not to. Cobalt’s another story. DRC and Russia have been the major sources for decades.

At Financial Times John Paul Rathbone and Steff Chávez raise a point I’ve been mentioning for some time. It’s easier to say “give the Ukrainians what they need” than it may be to do it:

In May, when Washington ordered 1,300 Stinger anti-air missiles to replace those sent to Ukraine, the chief executive of Raytheon, the defence company that makes them, replied: “It’s going to take us a little bit of time.”

Paris, meanwhile, has sent 18 Caesar howitzers to Kyiv — a quarter of its total stock of the high-tech artillery — but it will take French company Nexter around 18 months to make new ones.

Their conclusion?

Military experts have been scouring the Ukraine conflict for insights about the nature of modern war. Lesson “number one” so far is the importance of maintaining basic stockpiles, said Jack Watling, senior research fellow at the Royal United Services Institute think-tank.

“This isn’t new, but it’s something we have been determined to ignore for a very long time,” Watling told a warfare podcast. “Cheap munitions that you can use at scale are absolutely critical . . . [The west needs] to be much more disciplined about not always chasing the exquisite but instead understanding how the exquisite enables the fairly dull and mundane.”

I would say that “lesson number one” should be don’t delegate the production of basic munitions or the materials or equipment needed to make more to prospective adversaries but maybe that’s just me.

This morning I watched the talking heads programs. I know. That was a mistake. One of the features on CBS Sunday Morning that caught my attention was a profile of Harvey Weinstein, formerly the CEO of Miramax Films, then The Weinstein Company, and now in prison for multiple convictions on sexual assault and abuse.

The fact of Harvey Weinstein’s sexual predations were distressing but they didn’t surprise me. Sexual abuse has been part of the Hollywood culture from its very origins. The first Hollywood sex scandal to make national news was in 1921. What really distressed me was that people have failed to connect the dots.

Even following Mr. Weinstein’s multiple convictions on charges of rape and predatory sexual assault people have continued to praise the movies (at least some of them) that Mr. Weinstein produced. Has it never occurred to anyone that the properties that Miramax and The Weinstein Company chose to produce were vehicles for Mr. Weinstein’s proclivities and promoted sexual promiscuity and violence without consequences? Although the history of Miramax’s productions has been substantially sanitized, frequently described as “music pictures”, while reporters wax poetic over some of Miramax’s great movies, for the first half dozen or so years of its existence a lot of the pictures distributed by Miramax were basically soft core European porn.

The first movie actually produced by the Weinstein brothers was an R-rated slasher movie. It was notable in avoiding one of the conventional Hollywood tropes in which the victims are sexually promiscuous while the lone survivor isn’t, suggesting that the horrible fates of the victims were punishments for their promiscuity. The Miramax slasher picture suggested the opposite. During the making of that movie Harvey Weinstein harassed the staff, setting the pattern for what was to come.

In a country in which most of what young people “know” they’ve learned from watching television and the movies, a continuous diet of sex and gore has an effect and that effect was completely consistent with Weinstein’s sexual crimes. Say what you will about the Motion Picture Production Code, a reaction to Hollywood sex scandals, the period of its greatest sway is known as the “Golden Age of Hollywood movies” and Bollywood movies, which now exceed Hollywood movies in viewership and revenue, must meet a strict code enforced by the Indian government.