Remember that libel case against Oberlin College by a local bakery from a few years ago? Some Oberlin students shoplifted a bottle of wine, the store owners called the cops, the students were arrested. Then there were demonstrations against the store charging racism and discrimination which college officials facilitated and helped to organize. The store owners ended up suing the college for libel, intentional infliction of emotional distress, and tortious interference. The store owners won and a jury awarded the store owners $50 million. Oberlin appealed.

In an op-ed in the Wall Street Journal Thomas M. Boyd reports that Oberlin has lost its appeal:

Judging from the evidence unearthed at the trial and reiterated by the appellate court, it seems too many academics view their “mission” of encouraging students to express their political opinions to include actively participating in what can sometimes be, as in this case, the publication of false and defamatory material. This participation went so far that, in her testimony, Ms. Raimondo admitted instructing a subordinate to tell the supplier of food to Oberlin’s dining halls to stop supplying food to students from the bakery in what the appeals court called “a claimed effort to appease the angry students.”

The appellate judges held that while the trial court had properly found that “the student chants and verbal protests about the Gibsons being racists were protected by the First Amendment,” what separated Oberlin and placed it in a financial vise was the active, irresponsible and defamatory actions of several of its senior administrators. Rather than try to resolve the matter early on or use the resulting guilty pleas as a lesson, Oberlin actively sought to punish Gibson’s Bakery for having a different perspective, for standing by the arrest of the three Oberlin students, and for exercising its right of legal redress.

Fifty million dollars is a stiff price to pay for promoting what a jury and four judges found were false and defamatory accusations against a neighbor. Maybe this result will serve to remind other academic institutions that their vicious politics can have consequences.

Frankly, I doubt it will change Oberlin College administrators’ attitudes at all. The only thing that might sway them would be a disastrous collapse of alumni donations but I think that’s pretty unlikely. Oberlin alumni traditionally skew pretty far to the left. I haven’t been able to uncover any statistics comparing post-libel case donations with those before.

Paul Krugman considers the recovery of the Russian ruble in his latest New York Times column:

The question is why Russia is willing to defend its currency at the expense of all other goals. After all, the draconian measures taken to stabilize the ruble will probably deepen what is already looking like a depression-level slump in Russia’s real economy, brought on by surprisingly wide and effective sanctions imposed by the free world (I think we can resurrect that term, don’t you?), in response to its military aggression.

Let’s take a brief excursion into economic theory here. One of the classic propositions in international economics is known as the “impossible trinity.” The idea is that there are three things a country might want from its currency. It might want stability in the currency’s value in terms of other currencies — for example, a stable value of the ruble in dollars or euros — to create greater certainty for businesses. It might want free movement of funds across its borders, again to facilitate business. And it might want to retain freedom of monetary action — the ability to cut interest rates to fight recessions or raise them to fight inflation.

The impossible trinity says that you can’t have it all, that you have to choose two out of three. You can, like Britain, have open capital markets and independent monetary policy, but that means allowing the value of the pound to fluctuate. You can, like countries that have adopted the euro, have free movement of capital and currency stability, but only by giving up monetary independence. Or you can, like China, have a stable currency and your own monetary policy, but only by maintaining capital controls. (Those controls, by the way, are one main reason the renminbi isn’t going to rival the dollar as a global currency for the foreseeable future.)

So what’s puzzling about Russia? Normally a country can choose two out of three legs of the trinity; Russia has decided to take only one. It has imposed severe capital controls, but it has also sacrificed monetary independence, drastically raising interest rates in the face of a looming recession.

His explanation for why the Russian government has chosen stability rather than free movement of funds or the ability to cut interest rates is that the government has near total control of information within the country. My guess is that by raising interest rates as much as they have as fast as they have they think they have retained the ability to cut interest rates if necessary and their needing to raise interest rates beyond 20% is unlikely. Almost the opposite of our Federal Reserve.

At Pandemic Capitalism James Meadway speculates that the global financial system that has prevailed for nearly 50 years is being replaced. Among the passages in the piece I found interesting were this characterization of what has happened under the present financial system:

National-level financial systems could integrate with each other and, in defiance of the nationally-organised system of the original Bretton Woods design, disintegrate the relationship between domestic production and consumption in favour of the integration of domestic consumption into the value chains organised globally.

This disintegration of the national economy was the crucial element in the financialised reorganisation of the world economy over the years of globalisation. As organised through the neoliberal model of governance, applied in some form to close to every economy in the two decades after 1990, the opportunity to run domestic consumption entirely out of kilter with domestic production was more than an extension of the venerable principle of comparative advantage, in which the commodity grasp of economy could be extended by mutually beneficial trade; it was, importantly, the extension of the principle of international trade deeper into the sphere of production: of the finer and finer division of labour, on an international basis, and the search for the lowest relative cost of production available.

That evolution has been a lot better for some people than for others. It hasn’t been particularly good for most Americans but it been absolutely fabulous for a fairly narrow sliver, viz. the enormous concentration of wealth that has taken place.

What does he see happening?

Periods of hegemonic shift – as with, say, the passing of the sterling-oriented Gold Standard into the Bretton Woods system – are periods of dangerously radical instability. If we are not in the transition to a different hegemon – and it would be an ambitious stretch to claim China is anything close to this – but to a world where there are multiple, potentially competing world-currencies would be a radical departure. So, too, would be the return of a commodity money-form as one of those competing “world-monies”, in the form of the commodity-backed renminbi. The contradiction here would be less internal to the monetary regime, as external, occurring in the clashes between the different monetary regimes. This needn’t involve a clash of equals: a smaller, more tightly regulated commodity-money regime could confront a looser, but larger credit-money regime.

with

The presence of multiple, competing world-money forms threatens something still more dramatic. If we take what Charles Tilly called the two “master process” of the modern era, “the creation of a system of national states and the formation of a worldwide capitalist system”, it has been the formation of global monetary system, with a single, hegemonic world-money at its centre that allowed these two potentially conflicting processes to be reconciled: not without tensions, obviously, as the somewhat potted history above suggests, but at least organised to the point of not provoking outright collapse. Multiple world-monies, and the presence of competing forms of world-money – commodity-money (“outside”) versus credit-money (“inside”) suggests a radical new indeterminacy for the world-system as a whole, without the obvious means to reconcile them.

Throw in the instability of the environment – surely now the overdetermining factor in all considerations about the future – with the disruption to the fundamental processes of material production that this implies, and the future prospects for the presumed public goods of the modern world (peace between nation-states; prosperous national economies) are shaky indeed.

What goes unstated are the consequences of the disintegration of the relationship between production and consumption for the country which has benefited from it most—the United States. Reconstituting our ability to produce more of what we consume will be nothing like as much fun as eroding our productive capacity in favor of consumption has been. I doubt our political or social institutions are prepared for what is to come.

There’s a fascinating post at NBER by Lauri Scherer recapping a paper on the real price of nails since 1695. You can see what has happened in the graph above. After a lengthy period of slow declines during the pre-industrial period, the real price of nails declined sharply in the 19th century. Here’s the author’s summary:

The share of nails in GDP dropped from 0.4 percent in 1810 — comparable to today’s share of household purchases of personal computers — to a trivial share today. The decline in nail prices had important effects on downstream industries, most notably construction. In addition, Sichel highlights the changing “place” of nails in the public mind as nails shifted from being precious to being a throw-away item.

My question is why have real prices shot up over the last 20 years? That’s certainly counter-intuitive. My guess is that they’re talking about different nails.

The point of Scott Sumner’s post is in its title: “100% of excessive inflation is due to bad monetary policy”. Don’t be put off by the weaselish “excessive”. Anything over 2% (the notional Fed target for decades) is excessive inflation. We presently have excessive inflation. And here’s a précis of his point:

The Fed’s job is to insure an appropriate level of demand. On occasion, it may be appropriate for inflation to exceed 2% for a period of time due to supply issues. But that’s no excuse for excessive growth in nominal spending. When inflation is higher than it should be for demand side reasons, it is always 100% due to bad monetary policy.

Most of the post is a recap of Ezra Klein’s interview of Lawrence Summers. To hit the high points:

• Blaming inflation on “corporate greed” is nonsense.
• The Biden Administration is taking steps to reduce aggregate supply which is the opposite of what it should be doing.
• There aren’t many things the administration can do to slow inflation.

Dr. Sumner’s suggestion is to kick Jerome Powell upstairs, appoint him Secretary of the Treasury, replacing him with Janet Yellen or Lawrence Summers.

The other event yesterday of which I wanted to take note is Ukrainian President Zelenskyy’s firing of two generals. The words “saboteurs” and “traitors” were used. Gerrard Kaonga reports at Newsweek:

Ukrainian President Volodymyr Zelensky has decided to fire two of his top officials and has dubbed them “traitors.”

In an address on Friday morning, the President announced that he had fired the chief of Main Department of the Security Service of Ukraine (SBU), Naumov Andriy Olehovych.

He also removed the head of the SBU in Kherson, Kryvoruchko Serhiy Oleksandrovych.

I also listened to President Zelenskyy’s announcement (in Ukrainian). I don’t speak Ukrainian but I could follow the gist of it. I’m sure if I listened to Ukrainian more frequently I would understand more of it. He didn’t add any real details in his announcement.

Military experts here in the U. S. have remarked that there’s nothing unusual about firing generals in the course of a war. It seems to me that there is something unusual about dismissing generals on the grounds that they don’t know where their loyalties lie. Maybe I’m mistaken and that goes on all of the time.

I have no way of determining what that means. It could simply mean that their performance was lacking. It could mean they were Russian agents or ethnic Russian or both or neither. It could mean all sorts of things. I simply can’t tell. I was reminded of Voltaire’s wisecrack about the execution of Admiral Byng: Dans ce pays-ci, il est bon de tuer de temps en temps un amiral pour encourager les autres (In this country it is good to execute an admiral from time to time to encourage the others).

Yesterday President Biden announced several initiatives, targeted at reducing gas prices and increasing U. S. energy independence. After laying the blame for high gas prices on Russian President Putin’s invasion of Ukraine, President Biden announced:

Right now, the oil and gas industry is sitting on nearly 9,000 unused but approved permits for production on federal lands. There are more than a [12] million unused acres they have a right to — to pump on.

Families can’t afford that companies sit on these — their hands.

So, to help execute this first part of my plan, I’m calling for a “use it or lose it” policy.

Congress should make companies pay fees on wells on federal leases they haven’t used in years and acres of public land they’re hoarding without production.

Companies that are already producing from these wells won’t be affected. But those sitting on unused leases and idle wells will either have to start producing or pay the price for their inaction.

Look, the action I’m calling for will make a real difference over time. But the truth is it takes months, not days, for companies to increase production.

That’s why the next part of my plan is so important.

Today, I’m authorizing the release of 1 million barrels per day for the next six months — over 180 million barrels — for the Strategic — from the — from the Strategic Petroleum Reserve.

while in the long term he’s doubling down on his intention of reducing Americans’ use of oil for power and transportation:

The second part is about declaring real American energy independence in the long term so that we never have to deal with this problem again.

Ultimately, we and the whole world need to reduce our dependence on fossil fuels altogether. We need to choose long-term security over energy and climate vulnerability. We need to double down on our commitment to clean energy and tackling the climate crisis with our partners and allies around the world.

Obama advisor David Axelrod is quoted in the Daily Mail as saying that Americans’ don’t buy the framing “Putin’s price hike”:

Obama adviser David Axelrod said Friday that American’s ‘don’t believe’ the White House’s branding of high prices at the pump as ‘Putin’s price hike.’

‘[Biden] was saying, you know, everything is Putin’s price hikes. Inflation is Putin’s fault. People don’t believe that either,’ Axelrod said on his podcast with GOP consultant Mike Murphy and former Obama press secretary Robert Gibbs, Hacks on Tap.

‘They know that we had inflation before this. They know that gas prices were high before this so they haven’t dialed this in quite right. You can’t blame everything in the economy on Putin,’ he said.

The editors of the Wall Street Journal scoff at the use of the strategic petroleum reserve, characterizing it is the “strategic political petroleum reserve”:

His latest gambit on Thursday was to say he’ll release 180 million barrels from the national Strategic Petroleum Reserve in the next six months. This would be the biggest release in history and reduce the reserve to its lowest level since 1984. But the oil will need to be replaced, which will push up future demand.

This is one reason markets responded with a yawn. Crude prices fell a mere 4.9%. Markets don’t respond only to short-term demand and supply fluctuations. They also take into account long-term expectations and policy signals. And the Administration continues to signal that its goal is to bankrupt oil and gas producers. But before shooting them, Mr. Biden wants their political help.

which you will notice echoes a point I’ve made here. Well, of course it’s political. Everything a president does is political. I sincerely hope that the president’s actions result in a decrease in the price of gas at the pump. It’s one of the strongest leading indicators of recession in the U. S. There are reasons to believe it will. The amount released is something like 5% of U. S. use. That should be enough to move the needle a little. I hope the president also takes steps to ensure that the strategic petroleum reserve is not needed for, erm, strategic reasons before oil prices come down. Otherwise his actions could result in our being at a strategic liability.

However, the policies taken together seem to me to be an excellent example of dysergy—when the whole is less than the sum of the parts. They look to me to be at cross-purposes. “Use it or lose it” will discourage companies from taking out oil leases on public lands which will reduce production in the long term. It might increase production in the short term but that finding new oil isn’t like turning a spigot. It takes time and investment and a belief that once the investment has been made that those investing will be able to profit by it. And the president’s repeated commitment to ending our use of oil discourages investment.

In an op-ed at the Washington Post Sebastian Mallaby stops just short of declaring victory in the economic war against Russia:

As the Ukraine war grinds on, the West continues to prevail on the economic battlefield. Its sanctions are punishing Russia’s economy. Russian attempts to counterattack appear likely to backfire. And the result is a psychological blow to China, whose state-capitalist system was already looking vulnerable.

Start with the sanctions. By freezing the bulk of Russia’s foreign-exchange reserves, the West disabled Moscow’s main tool for defending its currency. In the first two weeks of the war, the ruble lost nearly half its value against the dollar. Soaring import prices, panic buying by Russians and shortages induced by other sanctions combined to drive inflation up to 2 percent per week. If this rate were to be sustained, Russia’s annual inflation would come to a catastrophic 175 percent.

Russia’s leaders have scrambled to prop up the ruble, but this has caused new difficulties. The central bank has doubled its key interest rate, punishing businesses and households and causing forecasters to predict a deep recession. Authorities have slammed on capital controls, banning ordinary Russians from exchanging rubles for dollars and limiting their ability to get dollars out of their own bank accounts. Russians with marketable skills are fleeing the country. As many as 70,000 tech workers have reportedly left already.

I think we should be a little more cautious before we declare victory on the economic front. Let’s start by asking a question: who is paying for Russia’s invasion of Ukraine? The answer is we and the Germans are, Germany directly and we indirectly.

The Germans import about $50 billion worth of gas, oil, and coal from Russia annually, the Chinese four times that much. Even if the Germans manage to cut their imports in half by summer, far from a fait accompli, they’ll still be paying the Russian’s $25 billion a year. All by itself that will pay for a lot of war—Russia’s total military spending was around $62 billion last year. The Indians have shown a willingness to take up whatever slack in Russian oil and gas reduced German purchases may produce, particularly at a discount from the present market value. As I’ve pointed out, with higher oil prices Russia can ship less and still make more.

And our $350-400 billion annual trade deficit with China can pay for a lot of oil and gas. I honestly can’t think of any other war in which hostile non-belligerents (that’s our and Germany’s posture in this war) continued to buy from the enemy and those supporting them.

I’m neither a naysayer nor a defeatist. I’m a pragmatist. If we are to prevail on the economic front against Russia, we’re going to need to start imposing sanctions on China, India, and anybody else who buys from Russia, too. I’m not convinced we’re willing to do that. I’m actively skeptical the Germans will.

In an op-ed in the Wall Street Journal Samir Puri, who is not without “on the ground” expertise, outlines the contours of a prospective Russian “victory” in Ukraine:

Either Russia will “butcher and bolt” by withdrawing on terms at least partly favorable to some Russian objectives, or its forces will remain and bisect a greater portion of Ukraine.

“Butcher and bolt” is a 19th-century phrase for a punitive expedition that wreaks havoc on disobedient imperial subjects after which the aggressor withdraws. Russian forces have demolished cities and shattered many Ukrainians’ lives. The city of Mariupol, where local officials say 5,000 Ukrainians have died, has suffered the sort of devastation once meted out by Russia’s air force in Syria. The Ukrainians may seek reparations if there is discussion of withdrawing Russian forces, but the toll on the country already is huge.

Russian forces are more likely to try to remain in parts of Ukraine. Kyrylo Budanov, head of Ukrainian military intelligence, said Russia wants to “create North, South Korea.” But South Korea retains huge U.S. military garrisons to deter future land grabs. A comparable scenario is unlikely here unless the U.S. sends major troop deployments to western Ukraine.

Divided Cyprus offers another analogy. Since Turkey invaded in 1974, Ankara has sustained the “Turkish Republic of Northern Cyprus” and Turkish forces are based there despite low levels of diplomatic recognition. That didn’t stop the Republic of Cyprus from joining the European Union in 2004. The division has evolved into a feature on Europe’s political map.

Russia may try to secure a stretch of land from the Donbas to Crimea even if it faces insurgency later on. Ukraine will never willfully give up its territory, but barring an unforeseen escalation that brings other countries into the fight, a total Russian rout looks unlikely. Even if Ukraine dislodges Russian forces from the 2022 territorial gains, evicting Russia from the 2014 gains will be almost impossible.

This is a bleak prognosis for Ukraine, which is no stranger to division. Its lands were bisected by Austria-Hungary in the west and Russia in the east until both empires collapsed in World War I. Mr. Putin is bent on securing something from his military misadventure. Whether he can depends on his awareness of the shrinking reality of what Russia’s invasion force can achieve.

Bleak prognosis, indeed. The quotation marks around “victory” are not scare quotes but because that’s Mr. Puri’s concept of the “golden bridge” that President Putin may accept instead of his original stated objectives.