Dana Blankenhorn

Tech Demands Freedom

America dominates the global tech economy because freedom.

The freedom to think what you want, and be who you want, is now the key to economic growth.

This is a point that’s widely ignored by American elites today. Americans love to talk about what’s wrong and have overestimated our global adversaries since 1776.

It’s most obvious now in our economic competition with China.

China is a great manufacturing power. But it continues to trail in software and science. It deliberately put down its Cloud Emperors for threatening the state. It can’t deliver the latest semiconductor technology.

Software is the product of hands and minds. You can’t automate its production, the way you can a car. You can improve productivity with better tools. But organizing a team requires that coaches listen as well as speak. Man management, they call it.

The best scientists, coders, and writers are all motivated by something inside. We’re not doing it for the money, we’re not doing it for an ideology. We each have our own reasons. In my case, it’s a desire I’ve had all my life to be heard, to be seen, to be part of the conversation. If you want to get the most out of us, you must respect that. China’s government doesn’t respect that.

Spoiled Rotten

When I was a kid in the 1960s and my late mother was mad at me, she’d say I was “spoiled rotten.”

Looking back, I was. So were most people of my generation.

We still are.

Our privilege as Baby Boomers makes us assume everything should be perfect all the time. When it isn’t we complain bitterly.

Right now, America is in the best of all possible worlds. We have the world’s strongest economy. Our unemployment rate is below 4%. COVID is in retreat.

The Privilege of Struggling Against Taliban and Oligarchs

I had no idea I was privileged until I moved into my present house.

My new neighbors were all black. Lower middle class. They worked hard. They had bought into the neighborhood 15 years before, in a rush, after the Open Housing Act enabled “integration” in Atlanta. It was, in fact, just a new form of segregation. But they were thankful for what they had, with a stubborn working-class pride in what they did and what they had done.

They raised me. (Mrs. House here lived to be 101. She was 99 and still going strong when I took this picture.)

About 20 years ago, with Afghanistan underway and Iraq coming, Republicans talked about how “we have to fight them over there, so we won’t have to fight them here” and about how “freedom isn’t free.”

Now we are fighting them here. The American Taliban and economic oligarchs represent the whole of today’s Republican Party.

They were right about one thing, however. Freedom isn’t free.

The Siege of America

Americans have felt under siege for over 13 years now.

The present era of history, the backlash against President Obama and all Americans who supported him, began within days of his election.

It has only accelerated since.

First, Obama himself was declared illegitimate, other, a foreigner. This lie made it easy to define Obama’s supporters in the same way.

Vladimir Putin used this hatred to make Donald Trump President. There is no longer any serious question. Trump was Putin’s man.

Trump created the conditions for a Second American Civil War. It began his first year in office. It only grew hotter after the murder of George Floyd.

Every American, even the most fervent Trump supporters, learned in 2020 that they were a minority among Americans. This broke their faith in the American Constitution, as the Confederacy broke faith with it in 1861. As was true then, government “of the people, by the people, for the people” was redefined to mean only some people.

Many Republicans still support Russia over Ukraine. Others seek to drop their own past into a memory hole, while retaining the essence of Putinism. They believe only those loyal to their twisted, anti-American ideals has a right to rule. They believe women should be slave to a man’s sperm, that blacks should be slaves to whites, that gays should be slave to straights, and that only history reflecting this may be taught. Anyone sympathizing with Obama’s America deserves to be oppressed, forced to repeat lies and made to shut up, forever.

This is what makes Ukraine the real turning point of history. The war in Ukraine is revealing the Civil War within America. The minority is as armed and angry as the South was in 1860.

The Siege of Ukraine

We’re now in the most dangerous and (for outsiders) nerve-racking portion of what I’m going to call Ukraine’s War for Independence.

It’s the siege.

Having spent most of the arsenal they came in with, Russia is trying to destroy Ukrainian cities and starve out the people, wrecking utilities, food supplies and safe gathering places. It won’t work. If you can’t take the people (and they can’t) you can’t take the place. That’s the lesson of Iraq, the lesson of Afghanistan, the lesson of Vietnam and nearly every other war since the Second World one. The only wars that work are wars of extermination. Ukraine is as big as Texas, with a population like California.

There Is No Housing Shortage

Today’s “housing shortage” or “affordability crisis” is artificial.

There are three primary causes.

First is private equity. Seeing big gains in prices over the last few decades, huge private investors have been piling into the market. They’re buying up the cheapest houses en masses and becoming slumlords. An example is Atlanta, where a huge part of the south side has been taken up. What makes it worse are tax breaks, meant to encourage affordable housing, which let private equity hide its profits.

There are two possible solutions, what should be done and what will happen. What should be done is that the tax breaks need to be reduced, slowly. As a matter of policy, we should be encouraging owner-occupied housing, and discouraging corporate-owned housing. What will happen is that interest rates will rise, increasing carrying costs, reducing profits, and causing some private equity owners to sell.

The second problem is technology. Technology has made houses more liquid than before. You still pay a fortune to move, up to 15% of equity. But costs for finding homes, choosing them, and transacting them continue to decline. Sadly, most of these gains are again going to big buyers. The move by OpenDoor to become a house-flipper rather than remain a tech outfit shows what is happening. Margins will decline once prices hit a ceiling, and again that depends on interest rates.

When Will This War End?

An Army travels on its stomach. It’s not generals who win wars. It’s economies.

This is the lesson of the Civil War and World War II. It’s the lesson of Ukraine.

War “experts” like to ignore this. They assume dictators can always get more of what they need from somewhere. Thus, they over-estimate America’s foes and under-estimate America itself.

Putin is all-in on the Ukraine invasion. He can’t put in more people without risking civil strife in Belarus, Kazakhstan, Georgia or even Russia itself. He can’t get more of anything, and his people are getting hungry. Money no longer works. Russia hasn’t had much manufacturing capacity since the Soviet era. The population was already falling due to vodka and COVID.

What’s needed to end the war is a way out of it. That’s why the President’s moves to re-supply Ukraine are all covert. The Congressional anger at Biden helps our cause. It lets him play the good cop.

Dawn is Coming

We’re approaching one of the biggest snap back rallies Wall Street has ever seen.

Once Putin’s War is over, everything’s going up. How much depends on the result.

Right now, signs are good. Israel has joined the sanctions regime. China is only going to sell stuff to Putin for cash. But China is in worse trouble than we are. They’re still fighting COVID with lockdowns. Their stock market is a mess. Their property magnates are collapsing. Hong Kong has created a brain drain. Shared prosperity is becoming shared misery. I expect a slow policy readjustment.

Once the war is over inflation will decline. Not magically. Prices are always sticky downward. You don’t cut your price based on costs. You do it when your rival cuts theirs.

Technology remains our best weapon against inflation. My long-term concern remains deflation, and how the gains of technology are apportioned. Fortunately, all those forces who sided with Russia, including our worst oligarchs, are being discredited by events. No one in Washington can see this because they only see today.

The Paralysis of War

War is paralyzing, even for those unconnected with it.

You can’t make plans. You have no energy. You have no idea what’s going to happen next.

I go back and forth. One day I think Ukraine can win this thing, or at least hang on until Putin is deposed. The next day I think they’re doomed, and the world with it.

Regardless of the result it’s already clear that Ukraine and Russia must be rebuilt. Ukraine, physically. Russia, politically.

It’s Russia that’s the biggest problem. It can’t sustain a Ukraine occupation. We couldn’t sustain one in Iraq, or even Afghanistan. Yet Putin thinks he can, and so-called “analysts” in the West agree. They don’t think the Russian people can do anything, nor do they think the Ukranians can once occupied.

This is naïve.

OPIC

My one fault with the Biden Administration so far has been its leniency toward its enemies.

Republicans aren’t the loyal opposition anymore. Vladimir Putin isn’t just an adversary. Those who still support Putin are domestic enemies, and it’s there in the oath of office, that you protect against both foreign AND domestic enemies.

The spike in oil prices may be another opportunity lost.

The opportunity is to create what I call an Organization of Petroleum IMPORTING Countries (OPIC). While the U.S. is nominally an exporter, we are the natural leader of this group, which could include India, Japan, Europe, South America, most of Africa and even China.

The first task of OPIC would be to account for the elimination of Russian supply from the market. Each member would agree to a specified reduction in imports, or an import maximum. Each member government would deal with this shortfall however it saw fit. But if no one breaks the agreement, then you can go toe-to-toe with OPEC in the oil markets, searching for price stability.

Saudi Arabia and other OPEC members want price stability. They like price spikes, but they know they’re a short-term thing. Over time, over the next 10 years, they know that their net production will rise, while demand will fall. The Sun shines, the wind blows, rivers, and tides, roll, we live on a molten rock, and there’s also efficiency. Today’s cars, trucks, appliances, and computers all use much less energy than they did before. The increase in time between charges for your phones is all due to their becoming more efficient. The batteries are the same.