You might be interested in reading this fascinating analysis at Financial Times by Gideon Rachman on how Russia and China are positioning themselves and not merely positioning themselves but cooperating in bringing about a “new world order” to supplant the old “new world order” of a hegemonic and aggressive United States:

Two features of the current world order that the Russians and the Chinese frequently object to are “unipolarity” and “universality”. Put more simply, they believe that the current arrangements give America too much power — and they are determined to change that.

“Unipolarity” means that, after the collapse of the Soviet Union, the world was left with only one superpower — the US. Fyodor Lukyanov, a Russian foreign-policy thinker who is close to President Putin, believes that unipolarity “gave the United States the ability and possibility to do whatever it saw fit on the world stage”. He argues that the new age of American hegemony was ushered in by the Gulf war of 1991 — in which the US assembled a global coalition to drive Saddam Hussein’s Iraq out of Kuwait.

The Gulf war was followed by a succession of US-led military interventions around the world — including in Bosnia and Kosovo in the 1990s. Nato’s bombing of Belgrade, Serbia’s capital, in 1999, has long formed part of Russia’s argument that Nato is not a purely defensive alliance. The fact that Nato bombs also struck the Chinese embassy in Belgrade has not been forgotten in Beijing.

After the 9/11 terror attacks on New York and Washington, Nato invoked Article 5 — its mutual-defence clause — and invaded Afghanistan. Once again, according to Lukyanov, America had demonstrated its willingness and ability to “forcefully transform the world”.

But America’s defeat in Afghanistan, symbolised by the chaotic withdrawal from Kabul in the summer of 2021, has given the Russians hope that the US-led world order is crumbling. Lukyanov argues that the fall of Kabul to the Taliban was “no less historical and symbolic than the fall of the Berlin Wall”.

Influential Chinese academics are thinking along similar lines. Yan Xuetong, dean of the school of international relations at Tsinghua University in Beijing (Xi’s alma mater), writes that “China believes that its rise to great-power status entitles it to a new role in world affairs — one that cannot be reconciled with unquestioned US dominance.”

The fly in this Sino-Russian ointment is that the interests of Russia and China are not aligned. Russia sees the emergence of a multi-polar world with spheres of influence; China on the other hand sees itself as supplanting the United States as global hegemon. There can be only one.

It should be obvious to anyone with a globe that while a Russia-Chinese alliance makes sense tactically it is senseless strategically. Further, although Russia seems to have entered a tenuous stability, there is every likelihood that China is at the peak of its power right now. Both countries may see benefit for themselves in expeditious action but Russia may well be more reluctant than China is likely to be.

Interesting times.

Here’s the Executive Summary of Jeremy Grantham’s analysis of present trading trends at GMO:

All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average.Today in the U.S. we are in the fourth superbubble of the last hundred years.Previous equity superbubbles had a series of distinct features that individually are rare and collectively are unique to these events. In each case, these shared characteristics have already occurred in this cycle. The checklist for a superbubble running through its phases is now complete and the wild rumpus can begin at any time.

He goes on to explain that we are presently seeing four bubbles concurrently:

• Real estate
• Equities
• Bonds
• Commodities

It’s an unprecedented situation and, when something is unprecedented, there is no way to know what will happen with any confidence. Here are his “Rules of the Bubble”:

1. All 2-sigma equity bubbles in developed equity markets have burst – all the way back to trend. The U.S. reached the 2-sigma level in the summer of 2020.
2. But some of them went to 3-sigma or more before they burst – producing longer and deeper pain. The U.S. reached 3-sigma in late 2021.
3. Timing is uncertain and when you get to 3-sigma superbubbles, such as we have now, there are few examples. Yet they have all shown certain characteristics before they broke.

1. A speculative investor frenzy that generated stories for distant decades, which we have had for well over a year;
2. A penultimate blow-off phase where stock gains accelerate, as we had in 2020;
3. And the ultimate narrowing phase – unique to these few superbubbles – where a decreasing number of very large blue chips go up as riskier and more speculative stocks underperform or even decline, as they did in 1929 and 2000 and as they have done since February 2021.

If a, b, and c are accounted for, light the blue touchpaper and retire to a safe distance, praying for a paradigm shift.

Nervous yet? If I didn’t live in the world, the “rumpus” might be fun to watch. As it is I do not look forward to it, even the less with inflation as high (or higher) than it is now.

Hat tip: Cullen Roche

Here’s some more gossip I thought I’d pass along. This comes from two high school classmates of mine (we took Russian together, were in the same homeroom for four years, etc.). Both resided and worked in Russia and/or Ukraine for decades. The first is from a classmate who as it happens is married to a Russian woman as well as speaking Russian fluently and having resided and worked there for a substantial period:

…[my wife] and I both agree that Putin is (literally) crazy, and that it’s next to impossible to predict what a crazy man will do. We both fear that he will take some sort of military action involving Ukraine. We are hoping that he is bluffing – and that NATO can call his bluff by, for example, supplying lethal offensive weapons to Ukraine. But, truly, nobody knows what’s in the mind of Putin and his inner circle.

Putin has an extreme inferiority complex regarding the image of Russia, never getting over the disgrace of the implosion of the USSR. Russia’s military has long been its primary claim to honor and glory. While possible, it is highly unlikely that the 100,000+ troops amassed along Russia’s border with Ukraine will simply withdraw without some sort of (further) incursion into Ukraine’s territory.

In addition to Russia’s current de facto occupation of the Donbass – while claiming only to be supporting Ukrainian separatists in the Donetsk and Luhansk Oblasts with (at a minimum) armaments and advisers, plus distributing Russian passports to separatists and non-combatants alike – Russia is still struggling to find a source(s) of water for the Crimean peninsula, which has an inadequate water supply for its inhabitants and which – pre-annexation – obtained its water from the Ukrainian mainland.

There is also Putin’s oft stated possible quest to reunite Russia – like with Crimea – with Novorissisk, a historically Russian-speaking part of the pre-Soviet Russian Empire stretching within the borders of Ukraine from Mariupol to Odessa. Putin often decries the “discrimination” against Russian speakers living outside of Russia in places like Donbass – and, of course, also like the Baltic Republics of Estonia, Latvia, and Lithuania.

Russia’s claim of having been previously deceived by NATO has more than a little validity. George H. W. Bush and James Baker made some relatively clear statements – at the time of reinstating the GDR into a reunited Germany – that NATO would not move eastward into the Soviet Union’s “near abroad”. Not only was NATO membership extended to nearly all of the former Warsaw Pact members: Poland, Hungary, Czechia, Slovakia, Romania, and Bulgaria, but also to 3 of the 15 former Soviet Socialist Republics of the USSR – Estonia, Lithuania, and Latvia. After NATO’s subsequent political overtures to Georgia and Ukraine, one might agree that there is more to Putin’s “drawing red lines in the sand” than just his paranoid bluff and bluster.

Lastly, Putin – and his coterie of kleptocrats and oligarchs – rightfully have serious concerns that the bad example of Ukraine’s movements toward establishing democracy and fighting corruption is already giving “wild ideas” to the millions of Russians living in an autocratic state under Putin’s control. There are serious domestic problems in Russia exacerbated not only by Alexey Navalny (even while in prison) and rampant inflation, but also by the foreign sanctions on Russia (in place already for some time) and by Russia’s global image becoming more and more like that of a pariah. In his worldview, Putin cannot afford allowing something very bad to become even worse by failing to keep a rogue Ukraine under control. Putin’s annexation of Crimea occurred after the regime change in Ukraine in 2013 when the Ukrainian President Yanukovych fled Kyiv for sanctuary in Russia. Further reforms in Ukraine could similarly trigger nervous reactions in Moscow, even including resort to military force enabled by troops along the border.

The other is from another classmate who lived and worked even longer in Russia:

…there is perhaps a 60% likelihood that Russia will indeed invade Ukraine, and only a 10% possibility that Putin will accept some deal with the U.S. and NATO, perhaps on the basis of resumed arms control negotiations and a suspension of ABM deployments. However, I recognize that there is something like a 30% possibility that it will be neither or none of these outcomes, including perhaps a 1% possibility that Putin will be replaced or will lose power. But even with it more likely than not that Russia will start an incursion into Ukraine, it is not certain what that will be or will become. Putin might push to set up a new government in Kyiv, but that depends on Russian and Byelorussian forces being able to advance quickly. If the Ukrainians put up sufficient resistance, it may force Putin to rethink his strategy although he is unlikely to stop until he can claim a victory of some kind.

For what it is worth.

Enough of politics and COVID-19 for the moment. Let’s talk movies.

What’s the greatest Hollywood movie? I know lots of professional critics love Citizen Kane but I’m not a fan. My candidates for the very best Hollywood film would include

• Casablanca
• The Best Years of Our Lives
• The Wizard of Oz
• The Maltese Falcon
• North By Northwest

Those have something in common: great ensemble performances, taut direction, decent writing, and above all, they are entertaining. And, with the possible exception of North By Northwest they all have heft—they have meaning. And they’ve all crept into the culture in one way or another. People quote them all of the time, sometimes without knowing that they’re quoting them.

If you twisted my arm I could be forced to add a few more contemporary movies to that list. Movies like Jaws (the movie that saved Hollywood) or Indiana Jones and the Raiders of the Lost Ark but good as those movies are I think they’re lightweights compared with those in my list. Some people would, presumably, add Apocalypse Now or The Godfather but both of those are a bit too tendentious for my taste. And I don’t much care for Marlon Brando. I don’t know whether I’ve mentioned it before but I have an odd characteristic, possibly the consequence of being from a show business family, which I refer to as “the actors’ real characters coming across the proscenium at me”. I think that’s the reason I don’t care for Marlon Brando, Marilyn Monroe, or Robert De Niro.

So, what’s the greatest Hollywood movie?

I see that the Chicago City Council is sticking with its core competency and not doing anything. In this case it’s the new ward map necessitated by the decennial redistricting. Crain’s Chicago Business reports:

The remap process has been fraught for months: A majority of City Council’s Latino Caucus is standing firm behind their map, dubbed the “Coalition Map.” It would create 15 Latino-majority wards, up from the current 13; 16 Black-majority wards, down from 18; a new Asian-majority; 15 majority-white wards and three wards with no racial majority.

Their map, they argue, reflects the city’s growing Latino population, which grew as the city’s Black population dropped. Latinos make up 30% of the city’s population, compared to 29% for Black Chicagoans, 31% for white, and 7% for Asians.

“Coalition Map” supporters are at continued loggerheads with 33 aldermen who stand behind a map created under Rules Committee Chair Michelle Harris, 8th. That map has the support of a majority of City Council’s Black Caucus and would create 16 Black-majority and one Black-influence ward, 14 Latino-majority wards and an Asian ward.

Harris hopes to get 41 total aldermen to support the Rules Committee map in time to avoid a referendum letting voters decide instead in the June 28 primary. The deadline to avoid that fate is in mid-May. Several Latino Caucus members filed paperwork already to put that measure on the ballot.

But recent spats suggest detente is out of reach: During the previous three hearings, members of Council could barely agree on who would testify first, who had access to the map room where districts are draw, or the basic protocols for negotiations. Harris supporters have said she “has faced more disrespect and disparagement from her colleagues than anyone prior to her” throughout the process.

Everything is unfolding exactly as I foretold. The black caucus and the Hispanic caucus, rather than making common cause are jockeying for power that their numbers don’t support. The beneficiaries of this political infighting will be white politicians.

I’m betting that it will be left up to referendum. I wonder what it would take to get another map to choose from? My guess is that the fairest map is probably the one supported by the Hispanic caucus but that actually overstates Hispanic strength in terms of voters.

When I listened to the panic-stricken coverage of the Ukraine situation on this morning’s talking heads programms, I was struck by one serious omission. Not one of them mentioned Germany and its reluctance to impose economic sanctions on Russia. The repeatedly spoke about Europe but never Germany. Europe will do whatever Germany says it will do.

Can you imagine the Germans marching to the defense of the Ukrainians? Me, neither. They’ll cluck their tongues and say “something should be done” (translation: we’re not going to do anything). Their plans for future prosperity are heavily dependent on a strong trade relationship with Russia.

The editors of the New York Times admit that President Biden is failing their version of the “Big Mac test”:

In a late December tweet, Mr. Biden quoted with evident approval an assessment that he had compiled “the strongest first-year economic track record of any president in the last 50 years.” The Treasury secretary, Janet Yellen, said Friday, “By most traditional metrics, the pace of our current recovery has exceeded even the most optimistic expectations.”

Most Americans don’t share the administration’s sunny view of its economic record, and it is little mystery why: The average worker’s paycheck doesn’t buy as many hamburgers as it did last year. (Using hamburgers to measure inflation is a twist on The Economist magazine’s Big Mac Index, which tracks the price of the classic hamburger in different currencies.) The government’s Consumer Price Index rose by 7 percent in 2021, the biggest jump since 1982. Mr. Biden’s approval rating remains low, and poll after poll finds that Americans are not pleased with his handling of the economy. Nearly two-thirds say the administration is insufficiently focused on inflation, according to a recent CBS News poll. There are similar numbers in other recent polls.

Nonetheless they believe he made the right choice:

The discomforting truth is that the United States last year faced a choice between a protracted period of economic pain and an economic recovery whose benefits are temporarily attenuated by high inflation. Mr. Biden made the right choice. But it came at a real price — economically, for the nation, and politically, for him.

That’s a good example of the tertium non datur fallacy or the false dilemma fallacy. Only two alternatives are provided: either inflation or a slow recovery. But there are other alternatives (that’s what makes it a fallacy) and one of them is to reduce imports and increase domestic production. When you borrow, i.e. “print money” or in our case issue ourselves credit to spend more you have several alternatives:

1. Import more
2. Produce more
3. Inflation

That is the tautology not an alternative between inflation and slow growth. “Production” in this case is measured in tons of steel, bushels of wheat, barrels of oil, and so on that are produced. For the last 40 years we have chosen to import more. I believe it’s time to take the other alternative. Re-industrializing will be harder than de-industrializing was and it can’t be done instantaneously.

Those I have referred to as “folk Keynesians” or “folk MMT-ers” don’t understand this but real Keynesians and real modern monetary theorists do.

Let’s give a single example. If you increase healthcare spending without increasing the amount of healthcare produced, it will raise the cost of healthcare, i.e. it will “inflate”. You can increase the supply of healthcare by reducing the amount of slack time for healthcare workers, i.e. the amount of time they’re not working, by making them more productive, or by increasing the number of healthcare workers (doctors, nurses, and technicians). Healthcare workers don’t have a lot of slack time at this point. Physicians are more likely to report that they’re overworked rather than they’ve got a lot of spare time on their hands. If you cap the number of doctors, that limits your choices to increasing productivity. That is very difficult to accomplish.

The editors of Bloomberg have found President Biden’s first year in office “disappointing”, something they largely attribute to his deferring to “the progressive left of his party”:

From the outset, Biden has deferred to the progressive left of his party — its most energetic wing, but one that is badly out of touch with much of the country and sees any kind of compromise as capitulation.

The most egregious? His speech in Atlanta last week:

The president’s most recent nod to the left is the most alarming. His speech last week in Atlanta made the case for voting-law reforms in a way that might’ve been calculated to kill any possibility of future cooperation across the aisle. Reasonable people can disagree about how best to ease voting access while protecting ballot security. But to slam opponents of the proposals as enemies of democracy and champions of “Jim Crow 2.0” — as the president did— is both inapt and self-defeating: How can Biden imagine that such rhetoric makes agreement more likely?

As I’ve said whenever the subject has come up, President Biden has no choice but to “defer” as they put it to the progressive wing of his party. His Congressional margins are so narrow he needs every vote and they are the loudest and most insistent.

By the way there is an unstated assumption within the punditry and, presumably, within the White House itself which is almost certainly not true. What makes them think that Joe Manchin and Kirsten Sinema are their only barriers within their own party in the Senate? That Joe Manchin’s position is secure enough for him to take stands unpopular with his own leadership grants to other Democratic senators who are not in complete agreement with the leadership but aren’t in as secure a position as Manchin, either, the leeway to vote against their own interest. There are probably two or three other senators in just that position. Members of the House, too.

Voting for a lousy bill you know won’t pass is one thing; voting for it when it will only pass with your vote is something else again.

And speaking of cognitive dissonance, Gallup has found that Americans’ approval of Congress has declined to 18%:

WASHINGTON, D.C. — Americans’ approval rating of the job Congress is doing has fallen to 18%, the lowest point in more than a year, as congressional Democrats’ efforts to pass spending and voting rights bills have stalled. The latest five-percentage-point decline in congressional approval is largely attributed to a 10-point decline among Democrats whose frustration appears to be mounting with their party’s senators and representatives who hold majorities in both houses of Congress.

Meanwhile, according to Gallup’s most recent update (2020) of approval of one’s own Congressional representative, that’s 59%. I wonder who people think Congress is?

Update

According to the RCP Average of Polls, the spread between President Joe Biden’s approval rating and his disapproval rating is the greatest of his presidency. It’s -14.8. He’s “underwater” as they put it. It’s not quite as bad as Trump’s was in the immediate aftermath of the breaching of the Capitol on Jan 6, 2021 but it’s flirting with it.

Update 2

At Mediate Joe DePaolo reports that 37% of Americans give Joe Biden a failing grade for his first year in office while only 11% give him an “A”:

According to a Politico/Morning Consult poll out Wednesday, 37 percent of respondents give the president an “F” for the first quarter of his presidency. By contrast, a meager 11 percent give Biden an “A” thus far, while 20 percent give him a “B.” Nearly a third of the country put Biden in the “C” or “D” category — with 18 percent giving the president a “C” and 12 percent giving him a “D.”

At this point in his term, Biden’s failing grade exceeds even former President Donald Trump’s. The 45th president got an “F” from 35 percent of Americans, compared to Biden’s 37 percent.

Biden got his worst marks on the economy, immigration, and “restoring unity” — with 40 percent flunking him in the latter two categories, and 38 percent giving him an “F” on the economy. His best grades came on Covid-19 and health care, where 35 percent and 31 percent respectively gave him an “A” or a “B.”

That means that 49% of Americans gave him an F or a D and only 31% an A or B. I think attributing that to partisanship alone is a stretch.