Re-reading Peter Zeihans new book

I’m re-reading Peter Zeihan’s new book Disunited Nations: The Scramble for Power in an Ungoverned World. It takes several readings to really absorb all the data, and the implications of that data, in this book. For those of you who may not have read it yet, I strongly recommend it. His writing style is easy to read, even fun, but his arguments are backed with masses of relevant data. If you would prefer to watch him rather than read him, his hour-long presentations, some available on YouTube, are a good introduction, though there is much, much more supporting data in his books. Try his online presentation here, for example, or a more recent interview here.

What I am particularly aware of during this re-reading is how sharply Zeihan differs from the “common wisdom” expressed in the media and by most of the ubiquitous talking heads and political actors in both parties. The so-called experts obsess over China’s rise - Zeihan argues, with masses of supporting geographic, historical, military, geopolitical, demographic and economic data that far from being a threat, China is on the verge of total collapse, perhaps in a decade, perhaps next year (he admits timing is the hardest part about predictions). The so-called experts obsess over Iran; Zeihan argues, persuasively and with data, that we ought to be more worried about Saudi Arabia. The so-called experts worry about America’s decline; Zeihan argues, again persuasively and with masses of data, that America has another century at least of pre-eminence, not because of any brilliance in our politicians (indeed, despite the best efforts of our political system to screw it up), but simply because of the luck of our geography.

So whom to believe? Since Zeihan bases his arguments on verifiable facts, like demographics and geography and history and existing trade routes, while others seem to have just emotional opinions, I find Zeihan’s arguments more persuasive. And I notice that the other serious geopolitical writers I follow (Robert Kaplan, John Mearsheimer, Stephan Walt, Richard Hass, George Friedman, Stephan Kotkin, Ian Brenner, etc) seem to all more or less agree with him, though there are minor differences in emphasis.

It reinforces Nassim Taleb’s argument that listening/reading the daily news doesn’t make one smarter; it actually makes one dumber because of all the unsupported opinions expressed authoritatively by people who really don’t understand what is going on.

An interesting question

It is clear that the economy is going to take a severe and long-term hit from the CORVID-19 shutdown, despite the apparent recovery of the stock market. A significant number of businesses are likely to fail, and of those that remain, many will not be able to rehire as many workers, which means a lot of people will be either unemployed, or at least earning a lot less than they used to, which will depress spending and hence further depress the economy. The Congressional Budget Office has a report out today (you can read it here) that predicts that nominal GDP won’t recover until around 2030, and that real (inflation-adjusted) GDP may never recover. That prediction assumes there is no additional effective policy action by Congress to address this risk.

The core of the problem is that average household income will be lower, so there will be less demand. One solution to that problem is for the federal government to pump more money into the economy through grants/loans to businesses and/or local governments, and/or various direct payments to households like the $1200/person that Congress doled out last month. Of course the federal government doesn’t have more money – it was already borrowing almost a trillion dollars a year even before the pandemic. In essence the government would need to “create” that money, either by borrowing even more, or perhaps just by “printing” more money (the current euphemism for that is “quantitative easing”).

Two factors help us in the short term. First, dollar-denominated assets at the moment look like a lot safer place to put wealth than anything else in the world (however bad our economy, the economy of most other places looks worse), so there has been a lot of capital flight worldwide to the dollar, which is why so far the government has been able to borrow so much at such favorable interest rates (current interest rates in new US debt runs about 2.5%). But the federal government does something that your local bank won’t let you do – when a bond comes due they simply “roll it over” by selling a new bond to pay off the old one. That works as long as U.S. bonds are perceived to be safe investments.  If that perception ever changes, we could have a lot of sudden flight out of Treasury Bonds, or at least we would have to offer a far higher interest rate to sell our bonds, which would cause a major problem for us.

And on top of this, the more extreme progressive wing of the Democratic party is full of wildly expensive ideas that would push the demand for federal funds and federal borrowing much, much higher, and that wing might force Joe Biden to adopt some of their ideas in order to get support from that wing of the party and win the election.

Second, for the moment at least the U.S. dollar is the world’s reserve currency, which means we can get away with some things that other nations can’t do so easily with their currency, like simply expand the money supply by “printing” more (sorry, I mean “quantitative easing”). But there are limits to how much of that we can get away with, and I don’t think anyone knows what those limits are.   

So the interesting question is this: what will be the long-term effects of such increased borrowing and/or quantitative easing? In particular, what risks does it entail, and are they as serious as the risks entailed in a depressed economy?  Not an easy question to answer, but it seems to me the essential question to ask at this point.

Relevent quotations from Terry Pratchett

There are writers who seem, somehow, to get right to the pith of things. The late Terry Pratchett was one of those. If you have never read any of Terry Pratchett’s Discworld novels, you have a treat coming. Discworld is a place where magic replaces science, giving Pratchett a wonderful scope to comment on science, academia, government, life and the world in general with his wry sense of British humor.

Looking at the general ineptitude of governments around the world (not just in the US), I am reminded of a quote from Pratchett’s novel “The Night Watch”:

“One of the hardest lessons in young Sam's life had been finding out that the people in charge weren't in charge. It had been finding out that governments were not, on the whole, staffed by people who had a grip, and that plans were what people made instead of thinking.”

And watching the riots going on now,

“People on the side of The People always ended up disappointed, in any case.  They found that The People tended not to be grateful or appreciative or forward-thinking or obedient.  The People tended to be small-minded and conservative and not very clever and were even distrustful of cleverness.  And so the children of the revolution were faced with the age-old problem: it wasn’t that you had the wrong kind of government, which was obvious, but that you had the wrong kind of people.

As soon as you saw people as things to be measured, they didn't measure up. What would run through the streets soon enough wouldn't be a revolution or a riot. It'd be people who were frightened and panicking. It was what happened when the machinery of city life faltered, the wheels stopped turning and all the little rules broke down. And when that happened, humans were worse than sheep. Sheep just ran; they didn't try to bite the sheep next to them”

Review of Michael Moore's film "Planet of the Humans"

A few days ago I posted a link to Michael Moore’s new film Planet of the Humans (actually, Moore is the producer, Jeff Gibbs is the director). At the time I hadn’t yet viewed the movie; I thought it was of interest primarily because some in the academic community wanted to emulate authoritarian governments and ban and suppress the film instead of simply refuting it. In general Michael Moore’s films and public statements don’t interest me. He is a bit too extreme for my taste, but considering the fuss I though it was worth seeing what he and Gibbs had to say that was causing such a reaction.

Now I have seen it. It’s not great. Gibbs, as the narrator, has a stultifying voice. And of course, being a Michael Moore film, it has an agenda and isn’t above shading the facts a bit to make his point. For example, they attack environmentalist Bill McKibben for his support of biomass energy plants. Well, it’s true McKibben 20 years ago supported biomass plants, but they fail to note that since then he has changed his mind and become a staunch opponent of biomass as an energy source.

Similarly, they lean a bit too much on the unsubstantiated claim that manufacture of solar cells and wind turbines costs as much energy as the energy they eventually produce. There are studies that suggest otherwise, though in fact those studies themselves have been subject to criticism that they are overly optimistic about the energy produced (wind turbines turn out to have significantly more downtime and higher maintenance costs than originally projected), and perhaps don’t capture all the real costs in the supply chain.  It’s not as clear cut as either the proponents nor the opponents make out, because in fact it is quite hard to find and quantify all the real costs of a complex supply chain.

But the overall point I think is valid. Renewable energy is useful, but it will never completely replace carbon-based energy until, perhaps, fusion power becomes economically viable.  And even then, much of the world depends on hydrocarbon-based feedstock for lots of other things besides energy, such as the pesticides and fertilizers that keep much of the world from starving to death.  And it is certainly true, as others have also pointed out, that “green energy” has become a highly profitable field for lots of big corporations, banks and funds, and a useful issue for some politicians, all of whom continue to support it often for reasons having to do with their own self-interest.

So my conclusion: an interesting film but not a great one, infected a bit with Moore’s and Gibb’s clear agenda, worth thinking about but not necessarily believing without more study. In the end, I still think the most interesting thing about it is the almost religious fervor of the reaction against it by some. When an idea, however good, becomes an ideology and then morphs into a religion too sacred to be challenged it ceases to be of much use.

Friedman's "Storm Before The Calm" and COVID-19

I have been rereading George Friedman’s new book The Storm Before The Calm. It takes a couple of readings to really grasp the complexity of his “two cycle” premise.

Friedman posits that the current political and social unrest is in part the result of growing tensions as an old system that used to work is beginning to fail. That old system, born at the end of the last cycle in World War II, was the growth of a technocracy to manage the affairs of government, but a technocracy now increasingly unable to manage the growing size and complexity of government. The ineptness, confusion and slowness of our “expert” agencies like the CDC and the FDA in the present pandemic are prime examples, especially when compared with the more successful responses in some other nations.

It occurred to me that we see that very conflict present right now in the tension between the medical experts, who want to keep the nation closed down, and the economic experts, who think we need to open up the economy whatever the medical consequences or we will destroy too many jobs. As Friedman points out, the problem with experts is that their expertise often tends to be deep but narrow, and they often don’t see the whole picture.

This conflict also reflects the social and economic divisions that were apparent in the last election. Progressives, who favor the medical solution, tend to be well educated knowledge workers who have done well in recent decades, and who have been perhaps inconvenienced by the shutdown, but not badly hurt by it; they mostly still have their jobs and paychecks, even if they have to work from home. On the other side are the service workers and manufacturing workers and all those in the gig economy, who were already hurting financially before the pandemic and for whom the continuing shutdown is a financial disaster, the more so as more and more companies are forced out of business permanently, meaning their jobs won’t come back.

This of course gets recast in political terms in today’s heated climate, between “blue” groups who favor continuing shutdowns and “red” groups that favor reopening the economy, with each side hurling invective at the other.  In truth both sides have a valid point, and the rational resolution is probably some careful balance between them, which seems to be what many state governors are leaning toward, whatever the federal advice or media demands are.

I find Friedman’s “deep currents” approach to the current unrest much more edifying and useful than the endless attacks on personalities that clog the airwaves these days.

The controversial Michael Moore film

In case you have not been following the saga, there is an interesting battle going on now between Moore and some of the green crowd. Moore’s new documentary “Planet of the Humans”, takes on the mythology of the renewable energy field. It points out, for example, that your “green” electric car is actually powered by some nearby – likely coal-burning – power plant, so the so-called “renewable” aspect is really just a comforting illusion. He deals similarly with wind and solar power. Those who have read the Mark Mill’s paper “The New Energy Economy: An Exercise in Magical Thinking” which we were discussing some months ago, or read Vaclav Smil’s 2017 book Energy and Civilization: A History, or Richard Rhodes 2018 book Energy: A Human History, will already be conversant with these issues. You can get a quick summary of the content of his movie in the New York Post article Why eco-leftists are suddenly turning on Michael Moore. You can find the movie itself on YouTube here, if it hasn’t been removed again. It runs an hour and 40 minutes.

Perhaps because Moore has been a darling of the far left for so long, his attack on the prevalent mythology of the renewable energy crowd has sparked a vicious backlash from those who feel he has suddenly betrayed them. For a pretty good summary of this flap, read the recent Forbes article Stanford Prof Can’t Muzzle ‘Planet of the Humans’,Must Pay Defendant’s Legal Fees in SLAPP Suit.

What I find interesting in this flap is not so much the technical debate about the viability of this or that renewable energy source, but rather the attempt (dangerous, in my opinion) to muzzle debate on the issue by what purports to be a portion of the scientific and academic community. When ideas become so sacred that they can’t be discussed, debated or challenged, then we are on dangerous and unproductive ground.

The Biden accusation

Well, someone in the media FINALLY got around to actually asking Joe Biden about the Tara Reade sexual assault claim. He of course denied it, which is what one would expect whether it is true or not. Since there are no direct witnesses we will probably never really know whether it happened or not, though unlike the Kavanaugh accusation there are a number of people who recall being told about it at the time.

It seems to me the real story here is the painfully obvious double standard being applied by the media, Democratic politicians and activists, and the #MeToo community. With Supreme Court nominee Brett Kavanaugh all were absolutely sure he was guilty even though the evidence was very, very thin – in essence only Dr. Ford’s word. In Biden’s case, with much stronger – though not conclusive – evidence, Democrats are obviously ducking questions (or in Nancy Pelosi’s case, yelling at a reporter who dared ask her about it), and the liberal media ignored the issue as long as they could, and then came out with softball stories. Though apparently the New York Times story still wasn’t gentle enough, so they admit that the Biden campaign convinced them to rewrite part of the story to make it even softer. And the #MeToo community has suddenly discovered an urgent need for “due process” which they didn’t seem to feel was needed in Kavanaugh’s case.

I’m no fan of Donald Trump or Republicans these days, but I’m not happy handing over the government to this bunch of hypocrites either.