Canadian Cincinnatus

The most underreported story today: Russia’s systematic meddling in the Presidential election

In Europe, Russian dictator Vladimir Putin supports every fringe party and movement, both far-left and far-right, as long as they destabilize the status quo. For this reason, many anti-EU parties are funded by the Kremlin. For instance, in Greece, both the ruling Coalition of the Extreme Left, and the neo-Nazi Golden Dawn Party are bankrolled by Russia. Until recently, this sort of interference was unknown in North America.

Unfortunately, Vladimir Putin has succeeded on getting his tentacles inside every major political party in the US. First, there is Jill Stein of the Green Party. Last year, she attended the Russia Today 10^th anniversary dinner. Afterwards, she sent this creepy message from Red Square:

“It’s been so wonderful to see people come together from across all borders and from the across the political spectrum, really, come together around basic human values, around human rights, around the need for international law, including the need to reign in U.S. exceptionalism and totally reform and revise our foreign policy so that it is based on international law, human rights, and diplomacy”

This from a country that recently invaded two other countries, that has conducted a scorched earth war in Chechnya, has threatened Denmark with a nuclear attack, that has practiced a nuclear attack on both Sweden and Poland, and whose current leader ascended to power by orchestrating a terror campaign against his own people that killed 293 souls.

Then there is Gary Johnson, the leader of the Libertarian Party. On Russia Today, he defended the Russian takeover of the Crimea, stating that the Ukraine (a sovereign country) is to Russia what Puerto Rico (a territory taken from another country) is to the US. I guess Johnson is unaware of the Budapest Accord, which guaranteed the borders of Ukraine in exchange for Ukraine handing over its nuclear weapons to Russia. Both the US and Russia are signatories of this agreement – and therefore guarantors of Ukraine’s borders.

The real problems however are only encountered when you move up to the A-list of Presidential candidates. With Hillary Clinton, the concern is that Russia has the e-mails she had on her private server. The blackmail potential is huge. Against this, it must be noted that Hillary Clinton’s stated foreign policy has not to date favoured Putin.

More worrisome is the hack on the DNC server, which seems to have been done by Russia. Is Vladimir Putin is trying to tilt the election in Donald Trump’s direction by creating turmoil in the DNC? (Debbie Wasserman-Schultz had to resign over the contents revealed.) If Hillary Clinton’s principal opponent were a normal candidate, he would have immediately condemned this inexcusable foreign meddling. Instead, Trump made a stupid joke about it, regaling in his opponent’s misfortune.

Speaking of the Trump campaign, it has so far been the epicenter of Kremlin influence. Mike Morell, the former head of the CIA, said this:

“President Vladimir V. Putin of Russia was a career intelligence officer, trained to identify vulnerabilities in an individual and to exploit them. That is exactly what he did early in the primaries. Mr. Putin played upon Mr. Trump’s vulnerabilities by complimenting him. He responded just as Mr. Putin had calculated.

Mr. Putin is a great leader, Mr. Trump says, ignoring that he has killed and jailed journalists and political opponents, has invaded two of his neighbors and is driving his economy to ruin. Mr. Trump has also taken policy positions consistent with Russian, not American, interests — endorsing Russian espionage against the United States, supporting Russia’s annexation of Crimea and giving a green light to a possible Russian invasion of the Baltic States.

In the intelligence business, we would say that Mr. Putin had recruited Mr. Trump as an unwitting agent of the Russian Federation. [Emphasis added]”

An unwitting agent. An assessment like this - by a former CIA head of a presidential candidate - is unprecedented in American history. Trump supporters dismiss Morell, claiming that he is in the tank for Clinton. Of course, they do not consider the possibility that causality may flow in the other direction, that Morell only favours Clinton because he is horrified by Trump. This is what John Schindler says about Morell:

“His depiction of Trump as “an unwitting agent” of Vladimir Putin is shared by many American intelligence personnel, including most of the ones I know. And I know a lot of them from my own time in the Intelligence Community. Among seasoned Russia-watchers and those acquainted with counterintelligence, I don’t know any spies who would substantially disagree with Morell’s comments on the Republican nominee.

In a recent column analyzing Trump’s bizarre comments on Crimea and Ukraine, I explained that his falsehoods uttered on national television meant that the GOP’s candidate “Either is clueless about Crimea and Ukraine, being totally unfamiliar with the basic issues, and decided to pontificate on the subject regardless while on national television. Or he is consciously parroting Kremlin propaganda.”

Morell has chosen my second option for Trump, characterizing him as Putin’s man. The term “unwitting agent” is spy-speak for what Lenin (supposedly) famously termed a Useful Idiot, that is, someone who is duped into spouting propaganda that he may not fully understand. This is a harsh assessment but more charitable than the accusation that Trump’s is a witting agent of the Kremlin.[again emphasis added]”

Who is John Schindler? He is a former NSA man and a former professor of the Naval War College who has written extensively about Hillary’s e-mail scandal, carrying the torch on this issue since the beginning. He believes Clinton has committed numerous felonies. And he wrote the above lines in a newspaper owned by Donald Trump’s son-in-law. Roll that in your Trump cigar and smoke it.

There are also worrisome reports about Donald Trump’s finances. According to Edward Lucas – probably the best observer of Eastern European affairs writing today:

“His carefree ways with other people’s money — including numerous near-bankruptcies in past decades — mean that American banks shun him. 

Yet his debts have grown over the past year, from £270 million to £485 million; which suggests he may have borrowed heavily. 

His cash assets, meanwhile, have shrivelled. So where is the money coming from.

The short answer is Russia.

As the leading American newspaper, the Washington Post, reported: ‘Since the 1980s, Trump and his family members have made numerous trips to Moscow in search of business opportunities, and they have relied on Russian investors to buy their properties around the world.’

Trump’s son, Donald Jr, boasted to a property industry conference in 2008: ‘Russians make up a pretty disproportionate cross-section of a lot of our assets.’”

Then there are the numerous Kremlin-connected operatives in Donald Trump’s campaign, with the now-gone Paul Manafort being only the ugliest and most notable member. According to Schindler, Manafort was so closely connected to the Kremlin that he was probably run by a GRU (Russian military intelligence) operative when he was in the Ukraine working for Putin’s puppet there. He may have even helped orchestrate violent protests against US Marines in the Crimea in 2006. There is a word for somebody like that.

Then there is Carter Page, the Trump advisor with direct financial ties to Gazprom, the state-owned gas company that Vladimir Putin uses regularly as a foreign policy tool to enforce his will on other countries and to enrich his friends.

Third, there is Mike Flynn, Donald Trump’s foreign policy guru, a retired Lieutenant General, and former head of the Defence Intelligence Agency. According to Schindler:

“It seems that Flynn remains furious at Obama for firing him, and that anger may be the driving force behind his cozy relationship with the Kremlin. General Flynn has frequently appeared on RT (formerly Russia Today), the Russian government’s news channel aimed at the outside world. RT is unadulterated Kremlin propaganda—not a normal news network—as evidenced by its showcasing avowed neo-Nazis and having its own Illuminati correspondent.

Since Flynn is a Cold War veteran and a career spy, he knows exactly what RT is—he has no excuses. Yet this has not deterred him from appearing there regularly. To top it off, last December he attended RT’s 10th anniversary gala in Moscow, including a photo op with President Vladimir Putin.

It’s safe to say Putin would have a word for any top retired Russian intelligence general who regularly appeared on official U.S. television and did a photo op with President Obama. It’s not a nice word, and that general would be well advised to avoid drinking tea.

To make matters worse, neither General Flynn nor RT were willing to comment if he is a paid contributor to the network. If a possible vice president is an actual paid employee of Vladimir Putin’s Kremlin, that seems like something the American people should know.”

Again, to Trump supporters: this assessment also appeared in a newspaper owned by Donald Trump’s son-in-law.

You know, people ask me why I so strongly oppose Donald Trump even though I am a deeply committed conservative. This is why.

Conservatives have made a big deal of Hillary Clinton’s well-documented venality. And if she were facing off against any candidate but Donald Trump I would say the corruption charges against her would be disqualifying. But in the bigger picture, the Democrat Party has been corrupt for 150 years. There was Boss Tweed and the Tammany Hall machine. There was the Daly machine in Chicago and there was fightin’ Tommy D’Alesandro of Baltimore. While Hillary Clinton may be high on the corruption scale, what she has done is no different than what Tom Pendergast did in Missouri 100 years ago. Another 4 years of Democrat corruption won’t kill the Republic.

But what would be unprecedented - an event unparalleled in American history - would be a President beholden to a hostile country, one with nuclear weapons aimed at the United States and who regards the US as its “greatest strategic adversary” (Putin’s words not mine). The only other example I can think of is Henry Wallace, the Progressive Party candidate in 1948. But he came a distant fourth in 1948.

The world situation is more unstable today than it has been since the end of the Cold War, largely because the American President for the last eight years has been so weak. If his replacement were somebody actively rooting for the other side, I do not think the center will hold.

This is why I don’t want Donald Trump in the White House. Every other consideration is secondary.

The Alberta and UK elections: how to deal with insurgencies and how not to

On May 5, Albertans voted to end the longest unbroken streak of success that a governing party has ever enjoyed in Canada. The Alberta Progressive Conservative Party had been in power for 44 years straight. Today, the NDP, a socialist party, runs Alberta. The formerly governing Progressive Conservatives, led by Jim Prentice, went from 70 seats down to 10. They aren’t even the official opposition. In contrast, the British Conservative Party, led by David Cameron, was widely expected to lose seats, possibly even losing power to the Labour Party. Defying the pundits and the pollsters, David Cameron went on to win an outright majority on May 6. I believe the difference in outcome was due to the different way they handled their respective right-wing challengers.

The Alberta PC’s were challenged on the right by the Wildrose Alliance; the British Conservatives faced off against the United Kingdom Independence Party.

The Wildrose Alliance has been around in one form or another since 2005. In the 2004 and 2008 provincial elections, it won one and zero seats respectively. However, in 2012 it jumped to 17 seats. Trouble was brewing for the PC’s and everybody knew it. After an internal struggle to remove a horrible leader - Alison Redford, the ruling Conservatives decided to do something about Wildrose. On Dec 17, 2014 Wildrose leader, Danielle Smith and eight other MLA’s crossed the floor to sit with the Progressive Conservative government. Problem solved, or so it seemed. Unfortunately for the PC’s, Wildrose climbed from 17 seats in the 2012 election to 21 seats in the 2015 election – more than making up for the defections.

Meanwhile, on the other side of the Atlantic, David Cameron was grappling with his own right-wing threat: UKIP. An Alberta-style decapitation strike wasn’t in the cards: UKIP hardly had any seats in Parliament (except for some Conservative turncoats). Instead, Cameron stole some of UKIP’s thunder by promising to hold a referendum on EU membership and negotiate a better deal for the UK in Europe. He also made encouraging noises on immigration. Whether he will carry through on any of this now that he has his majority remains to be seen, but it was enough to keep UKIP from toppling Conservative MP’s through vote splitting.

Until this year, the classic example of this strategy was the Australian federal election of 2004 when John Howard won his fourth term as Prime Minister. While the vote share of his Labour rivals remained steady at 38%, his vote share increased by 3.6%. How did he do this? Simple. He co-opted the program of his smaller, right-wing competitors. For instance, the One Nation Party, led by Pauline Hanson – the ‘fish and chips lady’ - saw its vote share drop by over 3%. With new, revised policies on immigration, many One Nation sympathizers voted for John Howard instead, because he was actually in a position to deliver.

The classic example of what not to do occurred in the 1993 Canadian federal elections when Brian Mulroney’s Progressive Conservatives went down in flames. After winning the 1988 federal election over the US free trade deal, Mulroney chose to systematically humiliate his right-wing base. Once free trade was passed, he veered left. He instituted a value added tax, passed draconian gun-control laws, and presided over chronic sky-high deficits. If this wasn’t enough, he tried - twice - to fundamentally rework the Canadian constitution in order to enshrine left-wing labour laws, multiculturalism, socialized medicine, and an apartheid system for native Canadians into its text. Thankfully he failed. When Canada’s right inevitably revolted, he thought, where are they going to go? Where they went to was the Reform Party, which went from one seat in 1988 to 51 seats in 1993. Thanks to vote splitting, the formerly dominant Tories went from 156 seats to two in 1993. Yes, you read that right, two.

The lesson for political parties in first-past-the-post electoral systems seems to be this: if you have a challenger who competes against you for your core voters, you had better take them seriously, even if they have achieved little to date. They will continue to be unsuccessful until, all of a sudden, they are no longer. The best way to alleviate the threat is to co-opt at least part of their policies. Because the people who join protest parties are animated by principles rather than ministerial limousines, a decapitation strike - like the one Alberta Premier Jim Prentice expertly executed against Wildrose - won’t work. The absolute worst thing to do is what Brian Mulroney and his hapless successor Kim Campbell did: spit in their faces.

There is a cautionary note for the victorious David Cameron in all of this. Just because UKIP won only one seat (out of 650) in the British Parliament, it nevertheless should not be ignored. UKIP received the third highest number of votes in Britain; its problem is that its supporters are spread out evenly across the UK. The Scottish National Party only got 4.7% of the vote but, because their supporters are concentrated in Scotland, they won 56 seats. In a first-past-the-post electoral system, a party can win many votes and have nothing to show for it, until they cross some critical (but ill-marked) threshold. The thing Cameron must remember is that the Wildrose Alliance won almost no seats in its first two outings, but look where they are now – 11 seats ahead of the once-dominant Alberta Tories. Cameron had better not be as complacent with UKIP as the Alberta Tories were with Wildrose. One day, the insurgents might just cross that threshold. In 2004 and 2008, Wildrose received 9% and 6.5% of the vote respectively. In 2015, UKIP won 12.6%, so watch out David.

Islamic extremists forge a new, united European nation-state

What makes a group of people a nation? Any number of things: religion, language, race (i.e. kinship and DNA), shared history. All the peoples of Europe are defined by one or more of these ties.

Currently, the European Union is attempting to take those disparate peoples and create an entirely new nation state, called the European Union (which Winston Churchill optimistically called the Unites States of Europe). The EUcrats are trying to do that by increasing the economic ties between European nations, and with red tape.

So how well are they doing? Looking at the problems being created by the shared currency - the Euro - it seems, not too well. The Euro looks to be exacerbating rather than smoothing over ethnic tensions. Twenty years ago, there was no real hostility between say, Greece and Germany. These days, the two countries are at each other’s throats, with the Germans at wits end with Greek profligacy, and the Greeks comparing the Germans to Nazis almost every day. The provisional answer seems to be that economic ties can sometimes bind two groups together but can also place them into conflict. With regard to the second cause - the red tape continuously being spewed out from Brussels - I am unaware of any European who gets a warm and fuzzy from the overregulation emanating from unelected bureaucrats living an a foreign country –except the Davos crowd and dippy one-world-government utopians, who ooze contempt for the nation states from which they came.

Looking back at history, have mere economic and bureaucratic ties ever bound a group of people together? There have been a number of multicultural empires throughout history, the Persian, the Roman, and the British, but in every case, military success and sensible laws were unifying factors – made palatable by a laissez faire attitude to local customs and traditions.

In the end, though a people, a tribe, and a nation are just a group of individuals willing to fight and die for other individuals in the group, who they may not even know. Any less of a bond, and the group isn’t cohesive in any meaningful way. In Northern Ireland, Catholics and Protestants battled to the death for their respective tribes. In a pair of world wars, Germans and French fought pitched battles against each other, separated from each other by language and history, but internally united by kinship. Englishmen were inspired by Henry V to beat, against great odds, the French in the Battle of Agincourt. Who will follow this man into the breach?

The only conclusion that can be drawn from recent European history is that the European Union project is doomed, being both overly ambitious and poorly executed.

But it has occurred to me that perhaps this forecast is too hasty. Perhaps there is a forge in which a real, meaningful European Union can hammered into existence. What I am thinking of is another mechanism known to forge a nation: a common enemy. There is nothing like a looming foe to bring people together, even people with a history of hating each other. When I mentioned shared history a couple of paragraphs up, this is really what shared history is, because what is history but the history of war? And what greater collective effort is there than  defense against a common enemy? Past differences are put aside to overcome today’s emergency. At the end, new kinship ties are formed.

For Western Europe in the 21st century, that common enemy is Islamic fundamentalism. Islamic states have been the enemy of Christendom for more than the past millennium. Today, the Muslims live in Europe itself, making the common enemy that much more personal to Germans, Frenchman, Italians, and Spaniards.

In Eastern Europe, it is different. Muslim ghettos are nonexistent and nobody cares about Islam. On the other hand, they have Vladimir Putin…

Europe is threatened by elites who ignore legitimate problems

Both the Euro crisis, brought to the fore again by the recent Greek elections, and the anti-Islamic marches, originating in Germany but now moving around Europe, highlight two key problems facing Europe today: immigration and currency woes.

Let’s take the Greek crisis first. There are two competing narratives about who is to blame. One is that Northern Europe is far more productive than Southern Europe. Northern European countries, most conspicuously Germany, are hard-working, productive, and thrifty. They keep their government spending in check and the people work hard enough to afford their social spending. In contrast, the Southern European countries, most conspicuously Greece, are lazy, unproductive, and profligate. They produce very little but enjoy extravagant social programs courtesy of the German taxpayers. In order to fix their own predicament, the Greeks need to work harder and start living within their means.

The other narrative is that the Eurozone is a currency scheme set up for the benefit of the Germans. Germany is an export machine that needs to keep its currency down in order to maximize exports. By shackling its money to that of its weaker neighbours, it ensures that its own currency is weaker than it would be if it still had the Deutsche Mark, enabling it to export more. As well, because the currency of weaker economies is higher than it would otherwise be, they are enabled to buy more German cars than they could if all they had were Liras and Drachmas. So now the Greeks are told to cut government spending by the Germans because they bought too many Audis.

My take on this is that these two explanations are not mutually exclusive. Both contain an element of truth, but the underlying problem is not to be found in Greece or Germany, but rather in Frankfurt. The unified currency is one of the biggest economic mistakes made the Berlin Wall fell. By now this should be obvious to all. I am sure that it is to most EU citizens, particularly the Greeks. But here’s the problem, it isn’t to the elites in Berlin and Brussels and Paris. They seem hell-bent on continuing the project regardless of the damage it inflicts. And if the public votes against it, then it is the election and the public that are wrong, not the unelected non-representatives in another country.  The danger inherent in this arrangement is that if the legitimate parties ignore a serious problem, then illegitimate parties will take up the challenge. Take Greece. As a result of the Jan 25 election, two of the top three parties in Greece are The Coalition of the Radical Left (Syriza) and Golden Dawn – a violent, overtly fascist party. But hey, what did you expect when the forces of legitimacy champion an austerity program imposed undemocratically on the national government by unelected foreigners?

The second issue, immigration, came to the fore after the latest terrorist attack in Paris. First in Germany, and then spreading throughout many Western European cities, spontaneous but well attended, grass-roots anti-Islamic matches occurred. Again, the elites acted with moral outrage, Angela Merkel in particular, denouncing her own citizens. You know, Angela, given all the problems that Germany has with Muslim immigrants, what with unemployment, crime, lack of assimilation, and the festering of a violent ideology, don’t you think your voters have a legitimate point in there somewhere? Sure, denounce the intemperate remarks and extremist participants if you must, but wouldn’t it be wise to also revamp Germany’s immigration policy, particularly with regard to Muslims? In what way has their presence in large numbers made Germany a better place?

But, as with the currency woes, if legitimate elites ignore the problem, illegitimate forces will fill in the resultant void. While some of these forces are fairly civilized, like UKIP in Britain (which doesn’t stop the elites from denouncing them vociferously), there are many genuinely fascistic parties growing in popularity elsewhere in Europe, a lot of which are funded by Vladimir Putin in order to destabilize his geopolitical foes. For this reason, many on the New Right are openly supportive of Putin and his evil schemes.

What the Eurocrats have ignored or forgotten is that European countries are not multicultural entities. They are nation states, composed (in large part) of people from the same ethnic group and language. Because they ignore this basic fact, they don’t see the damage they cause by scrambling dissimilar people together. For an example on what can happen, take a look at Africa. A lot of Africa’s problems today originate from the fact that its national borders were drawn by colonialists with little regard to tribal boundaries. Such a mismatch is very conducive to war. Well, Europe is kind of like Africa in this regard, except that the tribes are called the French and the Germans and the English and the Spanish and the Italians.

One place in Europe where national boundaries didn’t line up with tribal boundaries was Yugoslavia, an experiment to unite all the Slavic tribes of the Balkans under one leader. This worked fine under a crafty but iron-fisted ruler like Tito, but look what happened after he died. Peace only returned after the Balkans ‘self-segregated’ – at the end of a nasty civil war. No amount of centralized planning can turn the European continent into something that it is not. But a lot of damage can be done along the way.

With massive immigration from a traditional enemy of Christendom, the only end result for Europe I can see are vast unassimilable ghettos developing within Western Europe, ghettos that will still be festering cauldrons of resentment and violence centuries from now. Think Northern Ireland writ large. Who needs that?

A fan of multicultural might object to this reasoning as fascistic, but it is quite the opposite. I am warning against the genuine fascism that is currently on the rise, and what Europe needs to do to head it off at the pass. Through his schmaltzy sentimentality and strategic blindness, the multi-culti EU elitist is the best enabler that the jackbooted thug has. 

How Greece can escape the Euro and prosper

A showdown appears inevitable between Greece and the EU now that an explicitly anti-EU left-wing party, Syriza, won the recent Greek elections. The new Greek Prime Minister, Alex Tsipras, has promised to end austerity, even if it means pulling Greece out of the Eurozone and reinstating the Drachma. Could this work out for Greece?

If I were a betting man I would say no. The chips are stacked against Greece, but there is a way it can be done, and with Greece coming out ahead.

The current problem with Greece is that the Euro is too powerful a currency for Greece’s weak and unproductive economy. The strength of the Euro is set by Germany’s dynamic, productive, export-oriented economy. Because Greece isn’t as dynamic or productive as Germany, its goods can’t compete on the international market so long as they are priced in Euros. The Euro also provides an artificial boost to the spending power of Greeks, enabling them to purchase foreign goods that would be priced out of reach (like German cars) if they had a normal currency.  The result is an atrophying, import-oriented economy.

There is a way out – but just barely. If Greece abandons the Euro for the Drachma, the Greek export sector will instantly get a boost. Unfortunately, this also means that the rest of the Greek economy will get hit in the face by a gale force wind because the price of every import good will skyrocket. The government budget will also come under immediate strain. Budget deficits will be forced to end overnight as the government is cut off from foreign capital.

The key to overcoming these difficulties is to power through them as quickly as possible. This means enabling the export sector in every way possible. This includes massive deregulation as well as aggressive tax cuts on producers. (I know, I know, a lot of Greece’s red tape emanates from Brussels. But with all eyes on the currently battle, nobody will care if EU decrees on toilet seats and light bulbs go ignored.)

As well, because the government has an apparent operating surplus today (i.e. not counting the interest payments), balancing the budget quickly isn’t as far-fetched as it seems - as long as you are willing to forgo paying interest on your debt. These can be renegotiated, as all the leverage will then lie with the Greek government. You want your money back Mr. German banker, then let’s talk.

Unfortunately, to pull this off, austerity will have to be maintained – and for the short-term, even tightened. Once the export sector kicks in, tax revenues will surge and the immediate crisis will have passed. But until then, the people will be hit hard, and for this program to succeed, they must grin and bear it. On the positive side, once the crisis ends, Greece’s economy will have been completely transformed from the sick man of Europe into a Mediterranean tiger.

Can Greece do this? Well, my homeland of Estonia did just that in 1991 when it separated itself from the Soviet Union. Radical free-market reforms were instituted and all subsidies to unproductive Soviet-era industries were dropped - instantly. As a result, by 1994 its GDP had collapsed by 45%. 45%! But by 1999, the GDP had recovered and was growing fast. The upside was that the economy of 1999 was completely different from the economy of 1991. Estonia had become the most dynamic economy of Europe.

One thing that enabled it to happen was national willpower. Everybody was willing to take the pain, because the alternative was unthinkable – national failure and shame. Pensioners, who had their savings wiped out when rubles became worthless, and who could barely make ends meet (especially if they didn’t have kids), had the memories of the Republic they grew up under in the 1930’s to see them through. We had to prove we were better than our hated Soviet overlords, but a lot of those old people had lived through Stalin’s reign so they were tough. Also, thanks to the Soviet Union, socialism was thoroughly discredited. Any Estonian who advocated for socialism was considered a traitor.

Does Greece have this willpower? I doubt it. In today’s Greece, socialism has not been discredited by history. In fact, socialism is looked to for salvation, as an antidote to the hated German-imposed austerity. And Alex Tsipras is not Mart Laar, Estonia’s most important Prime Minister of the 90’s, who won the Milton Freidman Prize in 2006, and who instituted the world’s first flat tax.

Here’s an anecdote of how radically free-market Estonia was before it joined the EU: when Estonia was invited to join the World Trade Organization, the government was told that it had to reduce tariffs and duties as a condition of acceptance. The Estonian delegation looked puzzled. But we don’t have any tariffs or duties on anything, so how can we cut them? In contrast, Tsipras wants to rehire civil servants and bring prosperity back by raising public pensions! Well, he can certainly try that if he wants to, but he had better have high-speed printing presses on hand to keep up with the resulting inflation.

Like in a lot of financial crises, a solution is at hand and it is possible, but only for those willing to take the bitter medicine that it requires.

“Putin’s Right Hook”

Graduate student David Ernst has a fantastic article on Russian strongman, Vladimir Putin’s political acumen. The article should be read in full, but here are some highlights:

“Vladimir Putin has suddenly emerged onto the world stage as a conservative.” 

“Russia’s rightward turn renders Putin’s regime immune to the criticism of western liberals, and polarizes western conservatives. … Moreover, it establishes an entirely new ideological precedent for autocratic regimes who seek to challenge the American led world order. … If Western Europe and the United States are serious about sustaining a world order that prevents conflict, enables prosperity and promotes liberty and the rule of law, then their governments should defend it on those terms. Evidently, the Kremlin has figured out how to either shut them up or turn them against each other.”

When the leaders of the free world lack the eloquence – or the self-confidence – to defend the values of the greatest civilization that ever existed, that’s a problem. And it is the fault of the post-modern ideology that grips so much of our elites. 

“Putin’s embrace of social conservatism … targets and exploits latent Western frustration with post-modern liberalism itself. In his most recent address to the Russian Federal Assembly, Putin spoke disdainfully of what for decades Americans have known as “political correctness”:

‘Society is now required not only to recognize everyone’s right to the freedom of consciousness, political views and privacy, but also to accept without question the equality of good and evil, strange as it seems, concepts that are opposite in meaning. This destruction of traditional values from above not only leads to negative consequences for society, but is also essentially anti-democratic, since it is carried out on the basis of abstract, speculative ideas, contrary to the will of the majority, which does not accept the changes occurring or the proposed revision of values.’”

The real irony is that political correctness is a communist concept developed by the Frankfurt School and found its greatest expression in the devastation of Mao’s Cultural Revolution.

“To hear a former KGB colonel bemoan the “erosion of ethnic traditions and differences between peoples and cultures,” and the “destruction of traditional values from above” is at the very least amusing, if not astoundingly mendacious.”

Let alone from somebody who rose to power blowing up his own citizens in an apartment-house bombing campaign he likely orchestrated.

“Putin is nevertheless speaking to sentiments that an increasing number of Westerners share. Moreover, he is the only statesman of any noteworthy stature who is publically addressing them. 

The opposition to political correctness is the greatest winning cause of our times that none of our cowardly politicians is willing to champion. Everybody –except the Frankfurt School left - hates it.

"In the United States, Putin’s right turn has exacerbated old divisions among its conservative intelligentsia. The reaction of some conservatives to Putin’s December speech has been positive, if not affirming. Putin’s call to return to traditional values and scorn for elites who willfully promote “abortion on demand, homosexual marriage, pornography, promiscuity, and the whole panoply of Hollywood values” compelled Pat Buchanan to wonder aloud whether Putin “was one of us?”

Pat Buchanan has lately become Exhibit A for the case that isolationists are fools – who end up being dupes of unsavoury foreign tyrants.

“Putin’s appeal to right in Europe is far more serious….Recent polling data, projections for the EU elections this May, and the Hungarian government’s recent solicitation of a 14 billion dollar loan from Moscow, however, suggest that Putin’s right turn coincides with widespread European disenchantment with the EU.”

The EU is the largest failed economic experiment since the demise of communism. Can anybody tell me what good the Euro has done?

“Russia’s growing influence in European affairs begs the question, how can policymakers in Brussels counter Putin’s charms? More specifically, how can they address the grievances that many Europeans have against the EU, and indeed the transatlantic alliance itself? The dispiriting answer increasingly appears to be that they cannot;”

The President of the European Council, Herman Van Rompuy, is a soul-less bureaucrat. Who would follow him into the trenches? To paraphrase Marlon Brando, “He is an errand boy, sent by grocery clerks to collect a bill.” 

“the only electoral trump card that the EU bureaucrats can play against Euroskeptics and the European radical right is the promise of continued economic growth, and the survival of Europe’s generous social programs.”

The promise of economic growth isn’t looking too good these days, which just leaves welfare.

"Other essential elements of the human condition: religious faith, national identity and a spiritual sense of purpose have no place in their discourse, or indeed in the EU’s very reason for existing. Putin has shrewdly chosen a debate over hearts and minds with an opponent who is entirely ill equipped to respond.”

People fight for things like “religious faith, national identity and a spiritual sense of purpose”. They don’t fight for bureaucracies.

“On the matter of gay rights, Putin is likely more than happy to draw a stark contrast with President Obama. The choice to select gay athletes to participate in the Olympic Ceremony in Sochi undoubtedly won Obama praise from his supporters at home. On the world stage, however, it stands to reason that Putin was using the very same old Marxist tactic of “heightening the contradictions” against Obama.”

The need to draw “a stark contrast” with your opponent in order to win, is a lesson moderate conservatives stubbornly fail to learn, no matter how much bitter electoral reality bonks them on the head every time they try make themselves indistinguishable from their opponents.

"The choice to send gay athletes in a clear statement of protest against Russia’s “anti gay propaganda” law feeds right into Putin’s claims that global western “elites” are forcibly imposing their “abstract, speculative ideas, contrary to the will of the majority” appear credible.”

In the West, the popularity of politically correct values like gay marriage is a mile wide and an inch deep.

“In the case of Russian skullduggery in the North Caucuses, Ukraine and in Syria, Putin has already won the debate against his Western liberal opponents. Such was evident in the Russian President’s letter to the American People urging them not to intervene in Syria in the New York Times on September 11th last year. Rather than draw a contrast with Obama, Putin cynically harnessed the American President’s very own liberal idealism, internationalism, and scorn for his predecessor’s bold use of American power. Putin warned the American people that action in Syria would undermine the credibility of the United Nations, that it would inspire hatred among foreigners towards the United States for its presumption and arrogance, and that it would prove every bit as fruitless as our efforts in Iraq and Afghanistan.”

Liberal utopianism results in a foreign policy that is just as foolish as right-wing isolationism is short-sighted.

“The Russian President’s sophistry notwithstanding, it was a flawless implementation of Saul Alinsky’s fourth rule of political warfare: make the enemy live up to his own book of rules. Many American liberals regarded the audacity of Putin to appeal their sensibilities with indignation, but they were speechless all the same. … When all was said and done, however, none could actually claim that what Putin said was wrong. Thus Putin left Obama with an ugly choice between publically buying his nonsense, or compromising his principles. Obama opted for a third option: make no choice at all.” 

Nobody is more effective at demonstrating the incompetence of President Obama than Vladimir Putin. Col. Ralph Peters has its right: “Putin has Obama’s number, and it is zero.” 

“Most disturbing of all, Putin’s successes demonstrate that he intuitively grasps the weaknesses inherent in modern liberalism itself. His objections to its shallowness, decadence, and materialism are especially potent, because they contain elements of truth. He sees that the European Union has a very tenuous hold on the identity of its citizens.”

“Effective grand strategies are distinguished insofar as they are able to articulate their objectives in moral terms, and then methodically filter them through rigorous assessments of what is possible. Currently, Putin is adopting a moral purpose for his country in international affairs, and it is lending him strategic clarity.”

As Napoleon once said, “The moral is to the physical as three is to one.”

 “Western Europe and the United States, by contrast, are increasingly confused about their moral purpose, and have thus lost the initiative in shaping global events. Their statesmen would be wise to blunt the divisive effects of Putin’s right turn by turning back to the basic elements of their civilization, and articulating why they are a force for good. As Ukrainian liberals struggle to gain political traction following their ouster of a Kremlin backed stooge, Washington and Brussels could challenge Russian influence by calling for self-government, ordered liberty and the rule of law. Moreover, they could call out the Kremlin for its lawlessness and aggression.”

A leader convinced of the superiority of western civilization and possessing moral clarity, a Churchill, a Thatcher, a Reagan, or even a George W Bush, would have no trouble doing this.

The New Republic: “What’s Happening in Kiev Right Now is Vladimir Putin’s Worst Nightmare”

According to The New Republic:

“If it can happen in Kiev, in other words, it can happen in Moscow.”

Couldn’t happen to a nicer KGB goon. 

The article goes on to describe the ways in which Vladimir Putin is more ruthless and proactive than the management in the Ukraine when it comes to putting down dissent. The author also predicts that Putin will reaction the the current disturbances by cracking down even harder in Russia in order to prevent what is happening there from migrating eastwards. Of course, the more he does this, the less legitimacy he has left. In the end, regimes based only on fear are isolated and brittle and are hated by the populace. Putin’s salad days as the savior of Russia are over.

With the pro-EU Ukraine riots, President Obama could blow another historic opportunity

I believe history will judge President Obama’s biggest foreign policy mistake to be his failure to support the Green Revolution in Iran in 2009. Why? I think the abortive Green Revolution was a cusp in history.

What’s a cusp? Chaos theory teaches us that sometimes there are events, or points in time, where a complex system (like, say, a nation) can, with a small impulse, be shifted from one relatively stable state to another.  I believe the sustained uprising of anti-Islamists in Iran in 2009 was such a point in time. The streets of Teheran were flooded with millions of explicitly pro-Western, heck, even explicitly pro-Israel, anti-mullah demonstrators for many months. A small push, such as, say, a strong endorsement by the US President, backed up by covert CIA assistance to the resistance, could have replaced the largest and most militantly anti-Western regime in the Persian Gulf with a pro-Western ally. But it was not to be. Damn you Barack! You and your blinkered, obsession with appeasement.

General Patton once said that a moment occurs in every battle when both sides know they have lost. The side that continues in spite of this knowledge is the winner. In the case of Iran, the battle in question was the War on Terror, started by George W Bush as a response to 9/11 and fought at great material cost and human sacrifice by the US, and others. By 2009, America’s population was war weary and certain they lost. But, if they had persevered a tiny bit longer, with just a little bit of moral support and CIA assistance, the US could have achieved a near-total victory over the jihadis for a tiny fraction of what they had spent on the Iraq and Afghanistan Wars up until that point. The biggest sponsor of international terrorism would have been toppled, aid for the Iraqi insurgency would have been cut off and Afghanistan would have been transformed into an irrelevant backwater. But it was not to be, only because this last, smallest effort wasn’t made.

I believe the pro-EU riots are another historical cusp, with the largest nation in Eastern Europe tottering between the West (represented by the EU) and the East (represented by Putin’s neo-Soviet Empire). 

Sunday’s demonstration in Kiev, which may have been attended by as many as a million people, was buttressed by demonstrations in other cities around the country. These “EuroMaidan” protests in favor of establishing closer ties with the European Union have been ongoing for the three weeks following Yanukovych’s refusal to sign an agreement with the EU. And while that may have been the initial impetus for the uprising, the protests have become more anti-government in general.

If the Ukraine ends up under the Kremlin’s boot, it will be Putin’s greatest foreign policy victory:

‘The Russian side of the equation is illuminated by Financial Times columnist Gideon Rachman. He explains that the demonstrations are “both a humiliation and a threat to Mr. Putin,” because his “main foreign-policy goal is the construction of a sphere of influence for Russia, covering most of the old Soviet Union” and Ukraine “is meant to be the jewel in the crown.”' 

Years of effort might be required to contain him after he has plucked this jewel of 50 million people. Who knows what other Eastern European dominos - currently free and thriving nations - might topple. The stakes are even higher for Putin himself because the Ukrainian demonstrators have inspired his domestic opponents:

‘As The Atlantic’s Brian Whitmore explains, protests in the Ukraine have galvanized Russian opposition to Vladimir Putin’s autocratic rule. Protesters have gathered outside the Ukrainian Embassy in Moscow, and 30 high-profile Russians writers and poets wrote an open letter in support of their Ukrainian counterparts, noting that their demonstrations “would be a sign that in Russia we too can defend our rights and freedoms. We are with you!”’

This is why Putin he has tightened his grip on Russia’s state-run media.

What could President Obama do? First of all, he could say what George Clooney just said:

‘“I wanted to send a message to all of you brave citizens of Ukraine, who are struggling to look forward and not back. We here in the United States have great affinity for those seeking democracy. We have learned through trial and error that true democracy cannot exist without a free and fair and honest election. You cannot have a democracy when you arrest and harm its peaceful protesters.”

Imagine if that had come from the President of the United States instead of an actor. Second, the CIA could give covert aid to the government’s opponents. Third, he can increase American gas exports to Europe to undermine Gazprom. Fourth, consider this:

'Ukraine currently needs $10 billion to avoid possible default, even as the country remains mired in its third recession since 2008. Yanukovych has repeatedly rejected bailout terms offered by the EU’s International Monetary Fund (IMF), but remains enticed by Russia’s offer of financial aid and cheaper energy prices'

One way or the other, Obama could make that $10 billion problem go away. If you counter that $10 billion is a lot of money, consider how much is currently being spent in Afghanistan, for a war that achieved its post-9/11 objective long ago, and whose current purpose cannot be clearly enunciated by anybody.

The Ukraine must be free, and we in the West must do everything to make that happen!

A Europhile repents

It is truly heartening to hear somebody who embraced one of the worst policy mistakes of the past half-century to finally see the light. It makes one almost believe in progress:

“All my life I've been a Europhile.”

“Through all the vicissitudes of mid-night negotiations, I admired the dedication and vision of the negotiators who were building the European Union. I believed in the vision of a united Europe and welcomed the advent of the Euro as a major step along the way. When the recent crisis first broke three years ago, I welcomed it, thinking that surely it would be a catalyst for Europe to move to full financial integration and to greater political integration on the way toward realizing the vision of a truly united Europe.

I was wrong, and I have come to realize that my dream of a united Europe a la the United States, is not the European dream. Indeed, with great disappointment I have at last concluded that there is no European dream because a las those whom we on the outside call Europeans are not and don't want to be Europeans.”

While I am a great believer in ‘free market ideology’, I do recognize that one of the biggest weaknesses of modern economic theory is that it treats human beings as fungible quantities, who are no more than the sum of their quantifiable appetites (“homo economicus”). Meanwhile, in the real world, among their many recalcitrant qualities, human beings are fundamentally tribal in nature. It is folly to think that the EU bureaucrats in Brussels could wash all that history down the drain. It is not an insignificant fact that the people dictating the terms of austerity to the Greeks occupied their country in World War II. Speaking of whom:

“The Germans were firm in their conviction that the primary cause of the EU crisis is the laziness, profligacy, free rider attitude, and mendacity of the so called Peripheral Countries ( Spain, Portugal, Ireland, Italy, Greece, and even maybe France), especially Greece, Portugal, and Spain.”

Nothing like a one-size-fits-all solution to exacerbate ethnic tensions! The great genius of former British colonies like Canada and the US is the federal system, whereby governance is pushed to the lowest level of government possible. And even then, the US ended up fighting a civil war over issues too deep to reach agreement on.

“Did they [i.e. the Germans] realize that the German banks had been major lenders to and facilitators of the peripheral real estate bubbles whose collapse precipitated the crisis? Again, yes, but only in a kind of theoretical way. There was clearly no conviction that that was a primary cause of the problem or that keeping the German banks whole might have been an on-going drag on the recovery of the peripheral countries. Was there any understanding that for Germany the Euro is actually undervalued (compared to what a free standing Deutsch Mark would be valued at) and that much of Germany's export success is due to that? Absolutely not. No, Germany's success was seen as entirely due to hard work and financial virtue.”

Both explanations are correct. But the first one – German mercantilism – gets less press, perhaps because the concept of mercantilism is harder to understand than a lazy, corrupt Greek bureaucrat. It is often forgotten that Adam Smith’s A Wealth of Nations was not meant a defence of the free market but rather as an attack on mercantilism. What Smith did theoretically, the EU is currently demonstrating in practice.

“The Greek situation is truly a vicious circle. Austerity has led to dramatic shrinkage of the Greek economy which means that the debt as a percent of GDP is actually climbing rapidly despite the loans and other measures that have been taken in an effort to relieve and re-generate the Greek economy. The Greek situation is getting worse, not better.”

Yup. That’s what a bad monetary system will do: create a lose-lose situation.

“Everyone at the weekend meeting which included International Monetary Fund head Christine LaGarde knew and knows that the half measures agreed upon will not be enough.”

Everybody knows this. The trouble is, most people with the power to do something about it are afraid to face the solution.

“Everyone knows that there will have to be debt relief for Greece somewhere along the way. But German politics don't allow Merkel to face that reality right now.”

German politics... And the German banks that loaned all that money to the Greeks. Too bad they gave the Greeks so many bailouts. If they hadn’t, there wouldn’t be so many bad Greek loans on German books right now.

“The UK has always run hot and cold on Europe. At the present moment, it is running perhaps colder than ever in the past. Prime Minister David Cameron and his ruling coalition only want to be part of the EU as long as it leaves the UK more or less completely autonomous without having to pay any costs or having to accept any regulations. The betting among my sources is that the UK will be out of the EU within a couple of years.”

Three cheers for the UKIP! 

“As for the French, along with the Germans the main historical drivers of the EU, they now seem bent on doing everything possible to turn France into a true Peripheral country.” 

That’s what you get when you vote socialist. Paging Barack Obama.

Iceland shows the way out: don’t bail out banks

In 2008 Iceland suffered a catastrophic banking meltdown related to the collapse of an overheated real estate market.

“Iceland, like the rest of Europe, was faced with an almost unprecedented economic situation in 2008. Iceland’s central bank tried to rescue some of the country’s largest banks, bankrupting itself in the process. Iceland’s largest banks held almost 10 percent of Iceland's GDP in assets (much of it foreign) in 2008. The central bank was forced to attempt the rescue after agreeing to guarantee future bailouts in 2001. With the central bank out of commission and a crippled financial sector, Iceland’s GDP took a nosedive.”

“Iceland’s GDP per capita (in current U.S. dollars) was a little over $65,500 in 2007; in 2009 it was almost $38,000.”

But Iceland had one thing going for it that the United States and EU countries like Greece did not: It was too small and unimportant to be bailed out. As a result,

“Icelanders will do better than Greeks precisely because financial institutions collapsed in Iceland, ironically in part because of mechanisms in place requiring bailouts from the Icelandic Central Bank. Economic collapse allowed for proper refinancing. Greece has suffered from too much attention, and because of all of that attention, the actual size of the Greek economy has been forgotten.”

“This international neglect turned out to be Iceland’s saving grace. The crisis ended almost as quickly as it had begun. The Organization for Economic Co-operation and Development expects Iceland’s economy to grow by 2 percent this year and next. That’s not enough to replace the post-2007 loss, but it’s more than enough to return to the pre-boom trend line, and it’s much stronger than the performance of Portugal, Italy, Ireland, Greece, and Spain, affectionately known as the PIIGS economies. Iceland’s long-term interest rate, a not-inconsiderable 8 percent, compares well with a rate of over 13 percent for Greece, which is astounding when you consider that Iceland endured a default that Greece, in name at least, has so far avoided. The difference in unemployment—5.8 percent for Iceland against 16 percent for Greece—is even more striking. Iceland expects to have a balanced budget in 2013.” 

“So what’s causing the recovery? The plain-sight answer is the one nobody will consider. Iceland is coming back specifically because its banks went out of business. That happened in spite of strenuous public efforts, but the removal of the tiny nation’s colossally bloated financial sector turns out not to have eliminated all that much value. 

It bears repeating that banks are not creators of wealth. They are places where you store the surplus value generated by productive enterprise. In very narrow circumstances that surplus value can be loaned out at a profit, but a financial sector is the icing, not the cake. This should be common sense, but apparently it is wisdom so rare it can only be learned in countries small and remote enough to avoid the deadly medicine of the global financial markets. “ 

Though it sounds counterintuitive, bankruptcy is a necessary part of a free market’s healing process. Only when the bad debt has been purged, can the economic healing begin. When this isn’t allowed to happen because of artificial means such as bailouts and stimulus spending, the market can’t reach the bottom and zombie companies and banks remain alive to drag down the economy. The result are things like the protracted and painful ‘Obama recovery’ in the US, the endless cycle of bank bailouts in the Eurozone, and Japan’s lost decade(s). Thanks to bailouts and Keynesian stimulus, Japan has a debt to GDP ratio of 200% (the highest in the world, except for Zimbabwe) and has not yet recovered from the stock market crash of 1990!