Dana Blankenhorn

Nuclear Impunity

I wrote about the concept of impunity back in August.

I was talking in terms of American politics, but there’s a bigger kind of impunity, nuclear impunity, which Russia is now attempting to deploy.

The idea is that once you have a nuclear weapon you are immune to criticism. You can do whatever you want, kill whomever you want, because if you’re pushed to the brink, you can destroy the world.

North Korea is well known for this. The Kim dynasty can destroy their economy, starve their people, commit all kinds of crimes but South Korea writes it off because they have nukes. North Koreans are now several inches shorter than the people to their south. They suffer from chronic malnutrition. They live in a geographic prison, and no one will help them escape, because the Kims have nukes.

We can’t have effective nuclear non-proliferation with this kind of impunity. It’s too tempting. We know Israel has nukes. We just don’t say so. We know India and Pakistan both have nukes. We’re scared of Iran getting nukes because they might use them against Israel.

Too Much Winning

Joe Biden is proving to be the economic nationalist Trump only pretended to be.

America isn’t just back, baby. We’re rolling over the world. The dollar is as high as it’s been in 40 years. Inflation is headed down, even if markets don’t yet know it. We’re at full employment. Even manufacturing is coming back.

But there can be too much winning. When everyone else, including your friends, is losing, winning makes you the bully.

That’s what is going on now. That’s the real message of the Swedish and Italian elections. Voters there are turning on the U.S. as an economic bully. We’re exporting inflation to them, and they’re looking at a very long, cold winter.

When you treat your friends like adversaries, they become your adversaries. It’s one thing to crush your enemies. Russia is being crushed. China is in very bad shape. But when everyone is on the ropes it’s time to be a good winner.

What built American prosperity is we were good winners. We won World War II, then instituted the Marshall Plan, aid and loan forgiveness meant to give democracy a chance against the Soviet Union. We were magnanimous toward Japan, too, so that by the time of the Korean War they were mostly in our corner.

This is another such time. The Fed’s interest rate hikes, which quadrupled what the best borrowers pay for money over just three months, are going to cure inflation. Many prices are already coming down. But we don’t have to treat inflation as Sherman did Georgia to win. It’s time to take the foot off the gas, not on behalf of America but on behalf of England, of Germany, of Japan, even of China. They’ve had enough.

The Cloud is Hardening Borders

One of the biggest untold stories of 2022 is that of our hardening borders.

I’m not talking about national borders. I’m talking about borders between states.

This started with business. Since a worker can be anywhere, and so can a CEO, companies can now arbitrage their location based on local tax law. Tesla still employs people in California. So do companies like Snowflake, which now says it’s based in Montana because the CEO is there. Caterpillar is still an Illinois company but it’s moving to Dallas. They’re doing it to dodge taxes, moving just their CEOs, and their headquarters, to “low-tax” states.

The scam extends beyond income taxes. It goes to operations. It’s now common for companies to demand tax hand-outs in exchange for building the factories they intend to build anyway. Georgia is doing it for Rivian. Ohio is doing it for Intel. In all cases these companies are pushing tax burdens down, onto the middle class, away from where the money is.

The truth is there are no low-tax states. All states have similar responsibilities, so all states have taxes. Texas has high, regressive sales taxes and high property taxes, which hit the middle class hardest. California chose to target the wealthy with income taxes.

The tax war has been followed by states lobbing missiles at each other over national policies. The stunts cost their taxpayers cash but offer nothing in the way of relief. I’m not just talking about Texas and Florida transporting migrants to D.C. or Martha’s Vineyard. I’m also talking about California buying billboards offering help with red state pregnancies. It’s done in the name of local support, pushing national issues, owning red people in blue states and vice versa.

The Climax of the Story

Most Americans are taught that the climax of the Civil War came at Gettysburg, and that of World War II on D-Day.

These were turning points. Just as last November was a turning point.

Contemporary accounts tell a different story.

The climax of the Civil War came when Atlanta fell in September 1864.  Atlanta was the center for Confederate manufacturing. Birmingham hadn’t been invented yet. Wars are won by logistics. Without weapons or ammunition the Confederacy was toast. Lincoln was an underdog for re-election before Atlanta. After that he romped to victory.

The climax of World War II came with the Battle of the Bulge. News of the result didn’t come until practically the New Year. Even then the headlines were filled with the bloodier battles of the Pacific, which high school historians now ignore.

I believe we’re now at that point in the current struggle with fascism.

Kherson will be our Atlanta.

The Last Dance for Oil and Gas

Oil prices have been falling in recent weeks, and analysts have been telling investors to “buy the dip.”

They’re wrong.

The current “energy crisis” is a short-term phenomenon, caused by Russia’s invasion and falling production. Few people seem to comprehend that the falling production has a cause. The cause is a clear understanding that renewable energy prices are coming down. 

The new buzzword is “grid parity.” The definition is that solar and wind energy equal the cost of fossil fuel energy, without subsidy. That doesn’t just require panels and turbines. It also requires storage, so power levels can be boosted and lowered at will.

Side Effect

I should be dead. So should my wife. So should most Baby Boomers.

In my case, statins saved me. I have naturally high cholesterol, 373 when I got it checked in 2000. My dad (right) had a heart attack at age 47, a decade before this picture was taken.

Statins didn’t exist when  dad needed them, but today they’re generic, cheap. Same with my hypertension drug, an Angiotensin Reuptake Blocker (ARB). Without it my blood pressure was erratic in my 40s. In my late 60s it’s steady.

It’s not just my life. My mom went blind in her 50s, from retinal detachments. I just had my second retinal operation. It took 5 minutes. I was back at my desk the next day.

The good news is that Norman Lear and Mel Brooks are still alive. The bad news is, so are Rupert Murdoch and Donald Trump.

The Oh Noes

Thanks to technology the U.S. economy works well.

We dominate the world. Our gross domestic product is 25% higher than China’s, with just one-fourth as many people. Half the world’s cloud data centers are located right here. Scaled software lets us adjust to change faster than any economic rival.

Most of the time, these adjustments are minor. Some of us are retiring and want trips. Others are just entering the workforce. Some of us are saving for homes, while others are eating out or seeing shows.

The last two years have been different. We’ve all been doing the same thing. We were all locked inside during the worst of the pandemic fear. We all opened-up together, then we all sought to take trips together. Now we’re all watching a war together.

Counterculture

Here is the most important point about Trump, his acolytes, and the Christianist forces allied with him.

They’re a counterculture.

They’re not the culture.

The dominant culture of the West is tolerant. It’s tolerant because that’s in the best interest of technology, where creativity is the gating factor to economic growth.

The economic facts aren’t changing. China isn’t going to beat us because you can’t get mass creativity from slaved minds. Russia remains tied to the old economy of resources, money coming out of the ground. Even the Middle East is liberalizing, because the Sauds and their fellow sheikhs can see the handwriting on the wall, can see Israel becoming more powerful than they can ever hope to be. They know they must get on the right side of the new economy. It’s where they’re investing their oil wealth.

We are at War

The simplest explanation for this year’s events is one we don’t want to admit.

We are at war.

We are at war with Vladimir Putin’s Russia.

We were in a state of Cold War with Russia for years. Trump was part of it. Brexit was part of it. Putin subverted democratic processes, subverted the Internet, and subverted markets long before his invasion of Ukraine.

The invasion made this a hot war.

There is no alternative to Ukraine’s complete victory. Anything that leaves Putin in power only means we’re going to be here again. He isn’t like Hitler. Putin IS Hitler. It no longer matters that he has nuclear weapons. He may use them if we retreat, he may use them if we advance. We can’t limit our response to his threats. Putin’s victory would destroy humanity in any case, wrecking the climate in a global conflict of all-against-all.

It's time to go all-in.

How to Adapt to Accelerating Change

The chief theme of my working life has been the pace of change accelerating, under Moore’s Law.

We’ve all had to get used to it, but until this decade economists didn’t.

Now they must.

The pandemic has shown just how quickly economic behavior can change, and how inadequate our tools are for adjusting to it.

Just since the start of 2021, we’ve seen a tech-driven work-from-home economy replaced by a great reopening, followed by huge demand for goods, then workers, and now a giant stop sign as markets have saturated. But fears of recession may be overdone as services are replacing goods in the family shopping cart.