Sunday, May 10, 2015

Milestones

Just a few days over a century ago the Lusitania was torpedoed and sunk.

There is a good article in Fortune magazine about stalled attempts to recover her and to determine if she did in fact carry war material to England as the Germans claimed.  This time though it is the Irish Government and not the Brits that are holding up the attempt.

http://fortune.com/lusitania-gregg-bemis-legal-battle/

At the time (and since then) there was lots of propaganda and counter-propaganda regarding the event.  There have been other articles in the past confirming that there was ammo aboard, tons of speculation but was there any definitive proof?  Not sure myself but I would not put it past the British war office.  One article from the Daily Mail in 2008 'seemed'' to confirm they carried 303 rifle cartridges.  The bigger question is whether or not they carried guncotton and/or artillery shells that could have caused the lerge secondary explosion.   It would be good IMHO to know the truth.  I do not believe it was the Lucy that got us into WW1, but perhaps it head-shaped us into our eventual entry two years later.


Wednesday, April 15, 2015

Skyhooks

A Chinook May Soon Capture a Rocket Engine from the Sky

 Because the capture barge thing is not working.
 
 

Al - Looks like Elon Musk and his guys at SpaceX Corporation need your help.

It is doable possibly.  Didn't the Air Force use CH-3 Sea King equipped with retrieval systems to snatch early spy drones out of the air after their flight over North Vietnam?  I am not sure what the weight of  the Falcon engine is though.


Saturday, February 28, 2015

The Hazards of Policy Divorced from Sociology

Back in the early 1960s there was an incident at the firm where I worked that became legendary. Bob, a WWII veteran with a steel plate in his head was in Chicago on business for a few days.  In winter, he had to wear a hat, and the wind blew his hat into the street and down a storm drain.  He found a suitable replacement for $5 and continued on with his business.  When he returned, he put the $5 on his expense report, since being away from home precluded using another hat he already owned, and thus, in his view, was a medical expense directly related to his being on the road for the company.  His boss rejected the expense report with a prolonged rant.  So Bob went back to his desk, filled out another report, raising the total for his meals (for which no receipts were required if below given thresholds) by a total of $5.  He attached to the report a note, "While on business, my medically required hat was blown away, and I could not find it. My total legitimate expenses on my first report were $xxx.xx, including the hat.  Here is a second expense report for $xxx.xx, but without the hat.  You find the hat!"  The supervisor signed the original report, and it went through unchallenged.

We have previously discussed the Greek crisis.  One of the aspects of "corruption" in Greek society that arises is tax evasion.  The new government has made it a goal to attack tax evasion by the wealthier Greeks.  Critics of Greek society point out that many, many small businesses regularly and routine choose to do business "off the books", and thus don't issue receipts, avoiding VAT and income tax.  I can only speak for Paros, where I live, but in 10 years, I would say that the vast majority of our purchases, both large and small, have resulted in our receiving a cash register receipt.

Now, as an academically trained "political economist" whose specialty was labor market theory, it has interested me to see the blanket condemnation of self employed Greeks doing some business off the books.  Let's begin with some sociological factors.  For a variety of cultural reasons, 36% of the Greek workforce is self employed/family employed.  That's five times the rate in the US and 3 times the rate in Germany.  Businesses and real estate are handed down through the generations.  There is a strong personal bond between the people and their land and business.  Many would rather toil on their own for a meager wage than for a meager wage from WalMart.  I cannot begin to describe the mixed emotions in my Sicilian family when first my brother-in-law, and then I did not show an interest in joining and hopefully take over elements of our family's successful businesses.  It was almost as if we said we would not produce offspring to perpetuate the family name.  Americans really do not aspire to carry on the family business, unless it is extremely profitable.

Now, American right wing hype is that "small business is the engine of America", but the type of small business they refer to still does not result in a relatively large number of "self/family employed" people in the work force.  In fact, self/family employed represents just under 7% of the work force.  The vast majority of Americans work for somebody else, and can engage in very few personally enriching tax avoidance tricks in the conduct of business transactions.  They have to find other ways to evade taxes, often by off the books sidelines that do not show up in the labor force statistics, like eBay or unreported side jobs.

Now, why do employers like WalMart, McDonalds and most others ring up each and every sale?  Because they are honorable?  Hell no. It is because sales are rung up by employees and scrupulous ringing up is done to prevent employee theft.  Robbing the till has to be a very tempting thing for someone who can hardly put food on their table, etc.  If the register doesn't balance at the end of a shift, it ain't pretty.  It's a simple and easy to enforce compliance system when the owner of the cash register is not necessarily the operator of it.  While employee theft cannot be stamped out, it is included in the cost of goods sold, raising retail prices, which could reduce demand if prices rose enough to suppress demand.  Thus, the less than altruistice reason for keeping employees as honest as possible.  There is a limit on how much cost you can pass on to your customer.  Americans operating the cash register are basically honest because corporate interest, not social values, make it difficult to be otherwise.  I would also mention that such firms use other techniques to avoid paying taxes, and they do a fine job of it.



Of course, the US has other venues that allow and/or encourage  the WalMart, McD and other low wage earners to afford food, clothing and shelter.  It's called Food Stamps, Housing Assistance and Medicaid.  It's has been estimated that WalMart employees alone receive some $6 billion per year from those programs.  So, these retail giants may not be hiding sales and employment to evade taxes, but their poverty wage employees can "afford" to work for them at taxpayer expense.  You find the hat!




Now, look at typical IRS audit rates.  The emphasis is on higher revenue brackets.  Why, because that makes economic sense.  The amount of revenue involved addresses higher potential tax liability in absolute terms.  Keep in mind that only 7% of the workforce is self/family employed, so it doesn't take a lot of IRS resources to audit 2% percent of these folks.  It's a simple cost/benefit tradeoff.  Consider the magnitude and cost of trying to audit a workforce 5 times that size in proportion to the total.

Now back to Greece.  36% of the workforce is self/family employed.  In a shrinking economy where there are no Food Stamps, etc to help in bad times, the temptation to under report income is very powerful.  Unlike the WalMart or McDonalds employee in the US, shit wages in Greece are not supplemented by tax funded benefits.  Thus, Manolis the plumber, when having trouble putting food on the table, might put an extra 15 Euro in his pocket by not issuing a receipt for a 100 Euro job.  The WalMart worker is called "compensating for being exploited" for his tax funded benefits, and Manolis is "corrupt".  Yet WalMart wages are costing the US taxpayer billions in welfare costs, where the taxes evaded by all the Manolis' and Dimitri's unreported income might just pale in comparison.  You find the hat!

And, of course, economists are totally comfortable with the WalMart Model, as it all shows as part of GDP, while the Manolis Model doesn't.  Heaven forbid poverty should make GDP figures inaccurate.

How prevalent is under reporting in the US?  I have no idea, but I do have first hand knowledge of one case.  Years back, a doctor friend let his wife open a small botique in a local strip mall.  She was fashion savvy, but not business savvy, but as long as she broke even, he saw it as an good outlet for her.  Business was tight, and she couldn't afford enough part time sales people.  Several of the other merchants in the mall showed her how to hire high school students off the books, and how to cover those expenses by not ringing up an amount of sales that offset the employees' pay.  Just took a little time and effort to keep track of the expense and income on a separate ledger.  Just keep one kid on the books for appearances sake.  They all did it.  The avoidance in sales tax, social security, unemployment and workers' comp taxes was considerable enough to allow her to have three instead of two part time employees, and still earn enough profit not to set off any alarms - until she was telling her accountant about their wonderful two week trip to Hawaii, and he saw full revenues during those two weeks from a store that claimed only 10 hours/week of employee payroll expense.  He said that the knowledge of her vacation and what that implied precluded him from doing her store's taxes.   She simply changed accountants.  When her husband finally learned what she was doing, he shut her down and held his breath for the statute of limitations to pass.


I have no idea what level of tax revenue is lost via unreported sales in Greece.  But, before getting my panties in a twist about it, I consider the difference between Greece and the US in terms of the cost of taxation to subsidize low wages with welfare and the cost of tax evasion to supplement low wages, and I honestly have to say, "You find the hat!"

I'm not comparing what might be morally nor legally right or wrong.  I'm simply suggesting that life ain't as simple as some would wish it to be.  It may be true that what is good for the goose is good for the gander, but before you deliver that good, you better be sure that what you are calling a gander isn't a swan or a penguin or a cow.

Monday, February 16, 2015

Hanging 'em up

I don't want get all drama queen-y here, but I think it's time for my last round, gang.

I've just got enough going on that the zest has gone out of the lemon around the old 'Pub. Between my work (I'm starting on with a new outfit next week) and my family I'm busy in Real Life, and the new soccer season is starting up, so I have not just the Portland Timbers but a new season of covering our women's team the Portland Thorns for the local footy blog Slide Rule Pass. Throw in all that to the plain fact that I'm just not feeling the geopolitics and military affairs so much anymore, and rather than hang around like a sad old bag trying to eke out one more season I think it's best that I make a clean break.

I'll check in every so often to see what y'all are talking about and may have something to say once in a while. But from where the sun now stands, I will write here no more forever.

I do want to thank all here - I won't get all Oscar-night-y and name names but you know who you are - for a hell of a lot of good disputatious fun. Hope you can keep servin' 'em up and the customers libated, and all my best wishes for the future. Keep four yards, gang - don't let one grenade get you all.

JL/FDChief

Sunday, February 15, 2015

Moral Case for Greek Austerity?

I think it's very interesting that in the case of Greece, we've wound up in a situation that appears, from a moral perspective if not an economic one to resemble that of the Central Powers after their defeat in World War I.  A broken power who had wronged the group at large (albeit with noticeable contributions from those who had won the war) was being asked to make amends for their wrongs.  There was a debt to be paid.  It would be extracted from the nation, even if it hurt that nation.

Honestly, I find the parallels between the two countries to be striking.  Paul Krugman has found an interesting connection between the two countries here.  He suggests that
Austerity, it turns out, has devastated Greece just about as much as defeat in total war devastated imperial Germany.
I'll grant that there are far different circumstances going on now versus then.  But is it not odd that the nations of Europe would replicate an activity (essentially reparations) that was roundly felt to be a  wrongheaded and vindictive move 100 years ago?  And is it not even more so due to the fact that there wasn't a war; that Greece was involved in provoking a conflict that killed over 10 million people?  How has Europe/the West changed that the impoverishment of a nation over bank loans appears to have greater moral/legal standing than engagement in one of the most destructive wars of all time?

I think it's safe to say that Europe is acting on much stronger legal grounds than the Allies during/after World War I, but morally this seems far more dubious.  Is the economic destruction of Greece really worth so much?  Or are the news stories from Greece describing serious hardship an exaggeration?  Why are the reasons here stronger now than then?  I'll grant you that the victims are not a threat to the peace or economic life of Europe and so this isn't going to land us in serious hot water in the same way that the Treaty of Versailles impacted things.  And that there are legal and economic reasons for this policy.  But a poorly constructed idea based on punishing a wrong then is wrong now; perhaps more so if the wrongs are less.

The more I look at events like this, US in Iraq again, and Russia in Ukraine, you see examples of the law being only effective/helpful if you happen to be strong enough to enforce it.  Sovereignty appears weak when someone takes it from you and you don't have friends to take it back, or in Greece case, you sign it away.  I think it's worth considering if the legal trappings and righteous vestments we've thrown around ourselves are in fact doing what they were intended to do.  They had a purpose and reason for being that was supposed to make the world a better place for all nations.  Obviously they still do good, but I think that the past decade has shown that perhaps the good had less to do with the institutions themselves and more to do with the people running them.  The current crop of bureaucrats and bullies is as good as any indication that we haven't come that far from our past and should be wise to reconsider the our countries moral compasses.

Thursday, February 12, 2015

No. No, no, no, no. FUCK no.

Proving that like the Bourbons the people that constitute the "leadership" of the United States government learn nothing yet forget nothing the Obama Administration has gone to the poo-flinging monkeyhouse technically known as the United States Congress for a new authorization to use military force, this time against the congeries of wanna-be Sunni Muslim theocrats that go by the nickname "Islamic State".
"President Obama asked Congress on Wednesday for new war powers to go after the Islamic State of Iraq and Syria...The president’s request would replace the 2002 legislation that authorized the Iraq War but leaves in place a very broadly worded resolution passed in the wake of the 9/11 terrorist attacks."
Proving that you don't have to be a dry-drunk simpleton driving a short-bus-full of rage-drunk idiots and conniving weapons-grade-moron Machiavellis to fail to understand the words "don't", "involved", "land war", and "Asia" as well as the catastrophic decade of clusterfuckery that has followed Dick and Dubya's Most Excellent Middle Eastern Adventure the Obamites seem to believe that they can repeat the procedure without repeating the results.
I have absolutely no idea why they would believe this.

For one thing, the Daesh people (NB: apparently "Daesh" is the Arabic equivalent of the WW2 perjoratives "Huns" and "Nips" - it's the name that these guys' enemies use for it, since "Daesh" sounds similar to the Arabic words Daes ("one who crushes something underfoot") and Dahes ("one who sows discord") would like nothing better than for more U.S. joes to stumble around their 'hood killing people and breaking shit seeing as how that worked so goddamn well in Iraq. Doing what your enemy wants you to do is...well, "fucking stupid" are the words that come to mind but "the opposite of strategy" seems like a more measured way to describe it.

For another, well...fuck. IRAQ. Did we learn nothing? The reality on the ground is that the conditions in Iraq and Syria now are worse than when we invaded Iraq in 2003. There is no "government" in any sense of the word. The place has dissolved into a brawling mess of competing groups and semi-decrepit nation states (Turkey and Kurdistan being something of the exceptions...)

There are only two ways this will go.

The U.S. and it's "allies" will raze Sunnistan - the western portions of Iraq and the eastern portions of Syria - to the ground. They will kill and destroy until, as Bill Sherman would have put it, a crow flying over the Sunni lands will have to carry its own provisions. The U.S. will utterly destroy the Sunni capability and will to fight. And then...

...and then I have no idea. Perhaps the Sunni will consent to live under the rule of the other rump states, Alawite Syria and Shia Iraq, as chattel, as the Britons did under the Romans and the Tamils now do in Sri Lanka under the Hindus. That level of violence can produce submission.

Or, perhaps not.

But short of that level of violence?

I have no fucking clue what will happen. Nothing good, I assure you.

My friend Seydlitz says that the powers that be in the U.S. government have lost the ability to think about geopolitics strategically; to assess the economic, political, and military conditions realistically and then plot a course of action that uses U.S. strengths and the weaknesses of the area under consideration to produce a political, economic, and military endstate that benefits the United States.

I have always considered this optimistic. I don't know if the U.S. government has EVER had this ability outside of brief periods when smart people like George Marshall were running things.

But Marshalls seem to be in short supply, while we seem to have a never-ending amount of Dougie Fucking Feiths and Dick Goddamn Cheneys.

And now this.

Saturday, January 31, 2015

Grand Strategy: Can Frau Merkel et. al. Out Think Mr Spock?



NOTE:  I have no idea why the text color and background color got cocked up!

Europe has been on tenderhooks over the recent Greek election.  The week prior to the election, Frau Merkel warned Greeks about the risks of "not living up to their agreements", in an oblique attempt to sway the voters from Radical Left Party, Syriza, led by charismatic Alex Tsipras.  Tsipras has been very clear in that the "Bailout" agreement was not working, was based on flawed assumptions by its austerity theory authors, was causing untold human suffering, and in plain words, would not solve Greece's debt issues during this generation, if at all.


In the run up to the election, numerous respected economists had begun to question whether the bailout's austerity would ever work, not just for Greece, but all of Europe.  Guys like Paul Krugman, the Bank of England Governor and Reza Moghadam, one of the IMF officials involved in the original deal.  Moghadam admits that both Greek bailout programs (of 2010 and 2012) were based on overly optimistic assumptions on growth, inflation, fiscal efforts and social cohesion.

In short, while Merkel, the politician, along with some of her fellow austerity proponents, not only stood unquestioning behind what was seen, both in theory and application to be a seriously flawed package, intellectuals and practitioners were vocal in opposition.  How Frau Merkle thought her implied ultimatum could sway an electorate that was seriously suffering, and receiving respected voices opposing austerity, not only in Greece, but anywhere, makes no sense.  Indeed, I had several friends swayed from long term party loyalties in order to "vote against Frau Merkel".  And thus, Syriza, led by young, charismatic Alex Tsipras, changed the face of Greek (and possibly European) politics, rising from a minor coalition of left wing groups to the ruling party.




Now for the Grand Strategy part.  It has been clear that the backers of blind adherence to the bailout provisions had no strategic plan for dealing with a Syriza victory, other than to stick blindly to the bailout.  Nor had they done a reasonable recon of the party beyond it's leader, Tsipras, and his campaign pledges. But Tsipras was light years ahead of the austerity crowd.  Early the next morning, he had formed a coalition government with the Right Wing Independent Greeks Party, who shared Syriza's anti-austerity position, and ensured that certain "sacred" Greek institutions would not be threatened.  Tsipras' austerity opponents reeled and sputtered.  Even more amazing was that Tsipras formed a cabinet immediately and had a government ready to hit the ground running.  A totally unexpected feat for a parliamentary coalition.  Austerity proponents reeled and sputtered even more, openly expressing that they were confused, and warning Greece not to be "too hasty".

While Merkel et. al. were trying to convince Tsipras to back off from his anti-austerity stance, Greece's foreign minister dealt Merkel a huge setback.  Following Merkel's lead, the EU announced increased sanctions against Russia, calling them "unanimously adopted".  Within hours of taking office, Greece's new government complained it was not consulted before the European Union moved to threaten tighter sanctions on Russia, and thus the proposed sanctions were not legitimate and were an affront to Greece's sovereignty. 
Rather than admit the oversight, and fearing that Greece wanted no sanctions at all, a shocked European Parliament President, Martin Schulz, told Greek newspapers, "Greece should not undermine EU policy on Russia at a time when it is seeking support from its partners over its economic problems."  Schulz had foolishly suggested that Greece no longer was sovereign in external affairs, and when the Greek foreign minister arrived in Brussels for discussions of the matter, Schulz had no option but to backpedal and offer lame explanations for his ill chosen words.  The end result, the EU, with Greece's concurrence, settled on only extending the expiring sanctions another six months, and the austerity gang remains confused.  So within 72 hours of the new government's start in office, the score was Greece 1, Merkel maybe 0.5, and Greece has established a modicum of recognition for its sovereignty, despite its economic subordination via the bailout.

But that wasn't the biggest shock to the system.  Syriza selected respected left wing economist and academician, Yianis Varoufakis as Finance Minister.  A totally non-political player, Varoufakis has been an opponent of austerity as well as the terms of the bailout from day one, and his reasons why have come to pass.  Now you have Varoufakis, who called it correctly, versus Merkel and her Finance Minister, Schauble, who called it incorrectly.  And, Merkel et. al. still have no idea exactly what Varoufakis has in mind, other than expecting the worst case scenario.  Why?  Because Merkel et. al. have war-gamed only continuing their failing austerity scenario, which is gaining opposition from more quarters than just Greece, versus nothing. Thus, Varoufakis could very well have the upper hand.  Sooner than Merkel would like, the EU and Greece must meet to discuss the standoff they perceive, and so far, all that Merkel has in her quiver of arrows is the notion that "agreements must be fulfilled", ignoring that they are not working as projected, and probably never will.  So Merkel et. al. are seen as confused, and Varoufakis is described as not only a brilliant economist, but a "Rock Star".  As one local portrayed him:


  

Yup, Mr. Spock has logic on his side, and Merkel only has obstinacy.  Oh yeah, Spock has a growing body of economists agreeing with the folly of austerity, many of whom find the terms of the Greek bailout the pinnacle of such folly.

BTW, Varoufakis is considered one of the leading masters of game theory.  You know, If we do this, they will do that, to which we can capitalize on this, etc.  In short, is the confusion that some players are suffering because Syriza hasn't a plan, but rather, because Syriza wants to ensure weakness in the opposition to give Syriza the advantage, and thus have not really revealed their plan.  Thus, when one of the lenders warned that Syriza had to be less confrontational, lest the next loan be taken off the table, Varoufakis responded that the next loan was not wanted, as increased debt does nothing but exacerbate the downward spiral caused by the bailout.  In short, Spock nullified the ultimatum.

Speaking of ultimatums, very often, they can be the worst strategic blunders imaginable.  There is no shortage of reputable military historians who hold that "Total and Unconditional Surrender" only served to prolong WWII and increase the cost of treasure to all sides.  There is a reasonable number of cases where labor unions have issued a "cave to our demands or be put out of business", and management has simply given the union one of the two offered courses of action and liquidated the company.  And, of course, the harm to employees far out weighted the harm to the owners.  As one of my grad school profs said many years ago, keep in mind that when you issue an ultimatum, you very well surrender control of the situation to the person you are trying to intimidate.

So, Merkel et. al. have issued a veiled ultimatum.  Greece must comply with the original terms, "or else".  Does Frau Merkel, or her choir director, Herr Shauble, realize that the "or else" ultimatum is usually, in both tactical and strategic terms, the weakest of all?   What if Mr Spock has already war-games all the potential "or elses" and has plans to overcome them?  Consider an EU expulsion.  Greece currently has sufficient resources, if debt service is ended, to not only pay their other bills, but use the billions in debt service avoidance to provide better social services.  Expulsion from the EU would enable Greece to gain increased revenues via the ability to impose higher tax rates on all foreign owned companies, something prohibited by EU regulation.  Take the Athens airport, run under contract by a foreign firm, resulting in high user fees to insure certain levels of pre-tax profit.  The contract would not have to be broken, but the taxation of profits leaving the country could make the current operator desire to get out.  In short, a "Grexit" would have more ramifications than has been in the public discourse.  

Of course Greece will suffer pain via a Grexit, but that pain will not be exclusively Greek.  The Austerity folks have boxed themselves into a situation where there is no painless way out for the lenders, and many less painless ways out for the people of Greece.  Varoufakis knows this and knows a variety of ways of minimizing Europe's pain.  Merkel's intractability now has her and the Austerity crowd far behind in formulating both tactics and strategy.  Varoufakis has been war-gaming other approached to the crisis than that in place for a long, long time.  Merkel et. al. have not.

Has Syriza gained a strategic advantage?  We will see.  Right now, I'm betting that Tsipras, Varoufalis and Co are leagues ahead of the Austerity crew.  Perhaps even light years.  And, much to Merkel; et. al.'s concern, the austerity movement in all of Europe may be on the ropes.  It's hard to take on facts on the ground and Mr Spock's logic with, "So what if it isn't working.  You agreed to it."